Volvo 2012 Annual Report Download - page 126

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Volvo Group as the lessor
Leasing contracts are defined in two categories, operational and financial
leases, depending on the contract’s financial implications. Operational
leasing contracts are recognized as non-current assets in Assets under
operational leases. Income from operational leasing is recognized equally
distributed over the leasing period. Straight-line depreciation is applied to
these assets in accordance with the terms of the undertaking and the
deprecation amount is adjusted to correspond to the estimated realizable
value when the undertaking expires. Assessed impairments are charged
to the income statement. The product’s assessed realizable value at expir-
ation of the undertaking is reviewed continuously on an individual basis.
Financial leasing agreements are recognized as either non-current or
current receivables in the customer finance operations. Payments from
financial leasing contracts are distributed between interest income and
amortization of the receivable in the customer finance operations.
Volvo Group as the lessee
Volvo evaluates leasing contracts in accordance with IAS 17, Leases. In
those cases in which risks and rewards that are related to ownership are
substantially held by the Volvo Group, so-called financial leases, Volvo
Group recognizes the asset and related obligation in the balance sheet at
the lower of the leased asset’s fair value or the present value of minimum
lease payments. Future leasing fee commitments are recognized as obli-
gations. The lease asset is depreciated in accordance with the Volvo
Group’s policy for the respective non-current asset. The lease payments
when made are allocated between amortization and interest expenses. If
the leasing contract is considered to be a so-called operational lease,
lease payments are charged to profit or loss over the lease contract period.
Volvo Group as the lessor
As of December 31, 2012, future rental income from non-cancellable
financial and operational leases (minimum leasing fees) amounted to
52,322 (50,704). Future rental income is distributed as follows:
Finance
leases Operating
leases
2013 14,844 4 , 511
2014–2017 22,576 9,121
2018 or later 726 544
Total 38,146 14,176
Allowance for uncollectible future rental
income (436)
Unearned rental income (2,847)
Present value of future rental income related
to non-cancellable leases 34,863
Volvo Group as a lessee
As of December 31, 2012, future rental payments (minimum leasing fees)
related to non-cancellable leases amounted to 3,817 (3,799).
Future rental payments are distributed as follows:
Finance
leases Operating
leases
2013 124 950
2014–2017224 1,875
2018 or later 139 505
Total 487 3,330
Rental expenses amounted to:
2012 2 011
Finance leases:  
Contingent rents (10) (12)
Operating leases:  
Contingent rents (36) (20)
Rental payments (1,113) (1,035)
Sublease payments 7 5
Total (1,152) (1,062)
Carrying amount of assets subject to financial leases:
Dec 31,
2012 Dec 31,
2011
Costs:  
Buildings 226 92
Land and land improvements 41 53
Machinery and equipment 627 1,901
Assets under operating lease157 194
Total 951 2,240
Accumulated depreciation:  
Buildings (58) (30)
Land and land improvements (1) –
Machinery and equipment (288) (1,231)
Assets under operating lease1(14) (68)
Total (361) (1,329)
Carrying amount in the balance sheet:
Buildings 168 62
Land and land improvements 40 53
Machinery and equipment 339 670
Assets under operating lease143 126
Total 590 911
1 Refer to assets leased by the Volvo Group as financial lease which are later
leased to customers as operating lease.
ACCOUNTING POLICIES
NOTE 14
LEASING
NOTES TO FINANCIAL STATEMENTS
FINANCIAL INFORMATION 2012
122