Volvo 2013 Annual Report Download - page 137

OTHER OPERATING
INCOME AND EXPENSES
NOTE 8
Changes in provisions for doubtful accounts receivable and customer-
fi nancing receivables are recognized in Other operating income and expenses.
Other operating income and expense 2013 2012
Gains/losses on divestment of Group companies 144 596
Revaluation of assets held for sale1(1,458) –
Change in allowances and write-offsfor doubtful
receivables, customer fi nancing (923) (640)
Change in allowances and write-offsfor doubtful
receivables, other (299) (105)
Damages and litigations (117) (175)
Restructuring costs2(707) (1,524)
Volvo profi t sharing program (15) (208)
Other income and expenses (179) (41)
I/S Total (3,554) (2,096)
1 Including revaluation of Volvo Rents.
2 Restructuring costs are mainly related to the Group wide effi ciency program
which impacted the Group with an amount of SEK 715 M (1,550).
Read more regarding the company’s management of credit risk and credit
reserves in Note 4.
OTHER FINANCIAL INCOME
AND EXPENSES
NOTE 9
The unrealized losses from derivatives used to hedge interest rate expo-
sure are mainly related to the customer fi nance portfolio. The unrealized
and realized gains from derivatives used to hedge future cash fl ow exposure
in foreign currency are primarily an effect of SEK 283 M (–) from deriva-
tives used to hedge future cash fl ow of the acquisition of Dongfeng Com-
mercial Vehicles.
Other fi nancial income and expense 2013 2012
Gains and losses on derivatives used to hedge
interest rate exposure (66) 8
Gains and losses on derivatives used to hedge
foreign cash fl ow exposure 274 223
Financial instruments at fair value
through profi t or loss 208 231
Exchange rate gains and losses on fi nancial assets
and liabilities 101 (9)
Financial income and expenses related to taxes (22) (34)
Costs for Treasury function, credit facilities, etc (276) (266)
I/S Total111 (78)
1 Other fi nancial income and expenses attributable to fi nancial instruments
amounted to positive SEK 309 M (222).
Refer to Note 30 for information regarding Financial Instruments.
The Volvo Group’s recognized net sales pertain mainly to revenues from
sales of goods and services. Net sales are, if the occasion arises, reduced
by the value of discounts granted and by returns.
Revenue from the sale of goods is recognized when signifi cant risks
and rewards of ownership have been transferred to external parties, nor-
mally when the goods are delivered to the customer. However, if the sale of
goods is combined with a buy-back agreement or a residual value guaran-
tee, the transaction is recognized as an operating lease transaction if sig-
nifi cant risks in regard to the goods are retained in Volvo Group. Revenue
is then recognized over the period of the residual value commitment. If the
residual value risk commitment is not signifi cant or the sale was made to an
independent party before Volvo Group is committed to the residual value
risk the revenue is recognized at the time of sale and a provision is made
to refl ect the estimated residual value risk (refer also to Note 21 Other pro-
visions for description of residual value risk). If sale is in combination with a
commitment from the customer to buy a new Volvo product in connection
to a buy-back option, revenue is recognized at the time of the sale.
Revenue from the sale of workshop services is recognized when the ser-
vice is provided. Interest income in conjunction with fi nance leasing or instal-
ment contracts are recognized during the underlying contract period. Rev-
enue for maintenance contracts are recognized in line with the allocation
of associated costs over the contract period.
Interest income is recognized on a continuous basis and dividend income
when the right to receive dividend is obtained.
ACCOUNTING POLICY
SOURCES OF ESTIMATION UNCERTAINTY
!
Buy-back agreements and residual value guarantees
In certain cases, Volvo Group enters into a buy-back agreement or resid-
ual value guarantee after Volvo Group has sold the product to an inde-
pendent party or in combination with an undertaking from the customer to
purchase a new product in the event of a buy-back. In such cases, there
may be a question of judgement regarding whether or not signifi cant risks
and rewards of ownership have been transferred to the customer. If it is
determined that such an assessment was incorrect, the Volvo Group’s
recognized revenue and income for the period will decline and instead be
distributed over several reporting periods.
Refer to note 21, Other provisions, for a description of residual value risks.
Hard and soft products
The Volvo Group’s product range is divided into hard and soft products.
The sale of new vehicles, machinery and engines comprise hard products
as well as the sale of used vehicles and machines, trailers, superstruc-
tures and special vehicles. Soft products are defi ned as the sale of ser-
vices and aftermarket products.
Refer to page 38 World-class services for more information about the Volvo
Group’s services.
Refer to Note 6 for information regarding net sales by product and market.
NOTE 7 INCOME
133