Volvo 2012 Annual Report Download - page 135

Actual return on plan assets amounted to 2,124 (81).
Actuarial gains and losses 2012 2 011
Experience-based adjustments in obligations (412) (3,492)
Experience-based adjustments in plan assets 698 (1,324)
Effects of changes in actuarial assumptions (3,702) (209)
Actuarial gains and (losses), net (3,416) (5,025)
The Volvo Group’s pension foundation in Sweden was formed in 1996 to
secure obligations relating to retirement pensions for salaried employees in
Sweden in accordance with the ITP plan (a Swedish individual pension
plan). Plan assets amounting to 2,456 were contributed to the foundation
at its formation, corresponding to the value of the pension obligations at
that time. Since its formation, net contributions of 2,253, whereof 25 during
2012, have been made to the foundation. The plan assets in the Volvo
Group’s Swedish pension foundation are invested in Swedish and foreign
stocks and mutual funds, and in interest-bearing securities, in accordance
with a distribution that is determined by the foundation’s Board of Directors.
As of December 31, 2012, the fair value of the foundation’s plan assets
amounted to 7,217 (7,554), of which 31% (31) was invested in shares or
mutual funds. At the same date, retirement pension obligations attributable
to the ITP plan amounted to 12,140 (11,624).
Swedish companies can secure new pension obligations through balance-
sheet provisions or pension-fund contributions. Furthermore, a credit
insurance policy must be taken out for the value of the obligations. In
addition to benefits relating to retirement pensions, the ITP plan also
includes, for example, a collective family pension, which the Volvo Group
finances through an insurance policy with the Alecta insurance company.
According to an interpretation from the Swedish Financial Reporting
Board, this is a multi-employer defined-benefit plan. For fiscal year 2012,
the Volvo Group did not have access to information from Alecta that would
have enabled this plan to be reported as a defined-benefit plan. Accord-
ingly, the plan has been recognized as a defined-contribution plan. Alec-
ta’s funding ratio is 129% (113).
The Volvo Group’s subsidiaries in the United States mainly secure their
pension obligations through transfer of funds to pension plans. At the end
of 2012, the total value of pension obligations secured by pension plans
of this type amounted to 14,645 (13,925). At the same point in time, the
total value of the plan assets in these plans amounted to 10,592 (9,842),
of which 54% (54) was invested in shares or mutual funds. The regula-
tions for securing pension obligations stipulate certain minimum levels
concerning the ratio between the value of the plan assets and the value
of the obligations. During 2012, Volvo Group contributed 1,022 (829) to
the American pension plans.
During 2012, the Volvo Group has made extra contributions to the pension
plans in Great Britain in the amount of 87 (91).
In 2013, the Volvo Group estimates to transfer an amount of about SEK
1 billion to pension plans.
Plan assets by category 2011
Shares and participations, Volvo, 246 (1%)
Shares and participations, other, 9,565 (40%)
Bonds and interest-bearing
securities, 12,460 (52%)
Property, 644 (3%)
Other, 958 (4%)
Shares and participations, Volvo, 333 (1%)
Shares and participations, other,
10,041 (41%)
Bonds and interest-bearing
securities, 11,750 (48%)
Property, 766 (3%)
Other, 1,728 (7%)
Plan assets by category 2012
Provisions
Provisions are recognized when a legal or constructive obligation exists as a
result of a past event and it is probable that an outflow of resources will be
required to settle the obligation and the amount can be reliably estimated.
Provisions for residual value risks
Residual value risks are attributable to operating lease contracts or sales
transactions combined with buy-back agreements or residual value guaran-
tees. Residual value risks are the risks that the Volvo Group in the future
would have to dispose used products at a loss if the price development of
these products is worse than what was expected when the contracts were
entered. Provisions for residual value risks are made on a continuing basis
based upon estimations of the used products’ future net realizable values.
The estimations of future net realizable values are made with consideration
to current prices, expected future price development, expected inventory
turnover period and expected direct and indirect selling expenses. If the
residual value risks pertain to products that are reported as tangible assets
in the Volvo Group’s balance sheet, these risks are reflected by depreciation
or write-down of the carrying value of these assets. If the residual value risks
pertain to products, which are not reported as assets in the Volvo Group’s
balance sheet, these risks are reflected under the line item current provisions.
Refer to Note 7 for more information regarding Income.
Provision for product warranty
Estimated provision for product warranties are reported when the products
are sold. The provision includes both contractual warranty and so called
goodwill warranty and is determined based on historical statistics consider-
ing known quality improvements, costs for remedy of defaults e.t.c. Provision
for campaigns in connection with specific quality problems are reported
when the campaign is decided.
Provision for Restructuring costs
A provision for decided restructuring measures is reported when a detailed
plan for the implementation of the measures is complete and when this
plan is communicated to those who are affected. Restructuring costs are
reported as a separate line item in the income statement if they relate to
a considerable change of the Group structure. Other restructuring costs
are included in Other operating income and expenses.
ACCOUNTING POLICY
NOTE 21
OTHER PROVISIONS
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