Volvo 2013 Annual Report Download - page 138

The Volvo Group recognizes valuation allowances for deferred tax assets
where management does not expect such assets to be realized based
upon current forecasts. In the event that actual results differ from these
estimates or adjustments are made to future periods in these estimates,
changes in the valuation allowance may be required, this could have sig-
nifi cant impact on the fi nancial position and the income for the period. As
of December 31, 2013, the valuation allowance amounted to 125 (191) of
the value of deferred tax assets. Most of the reserve consists of unused
loss carryforwards. Net of this valuation allowance, deferred tax assets of
22,326 (23,096) were recognized in the Volvo Group’s balance sheet.
The Volvo Group has signifi cant tax-loss carryforwards that are related
to countries with long or indefi nite periods of utilization, mainly Sweden,
France and Japan. The Volvo Group considers that suffi cient income will be
generated in the coming years for the tax-loss carryforwards to be utilized.
Income tax for the period includes current and deferred taxes. Current
taxes are calculated on the basis of the tax regulations prevailing in the
countries in which the Parent Company and subsidiaries are active and
generate taxable income.
Deferred taxes are recognized on differences that arise between the
taxable value and carrying value of assets and liabilities as well as on tax-
loss carryforwards. Furthermore are deferred taxes recognized to the
extent it is probable that they will be utilized against taxable income.
Deferred taxes on temporary differences on participations in subsidiar-
ies and associated companies are only recognized when it is probable that
the difference will be recovered in the near future.
Tax laws in Sweden and certain other countries allow companies to defer
payment of taxes through allocations to untaxed reserves. However, in the
consolidated fi nancial statements untaxed reserves are reclassifi ed to
deferred tax liability and equity. In the consolidated income statements a
provision to, or reversal of, untaxed reserves split between deferred taxes
and net income for the year.
Income taxes were distributed as follows:
2013 2012
Current taxes relating to the period (3,453) (3,584)
Adjustment of current taxes for prior periods 327 (144)
Deferred taxes originated or reversed during the
period 2,048 (568)
Remeasurementsof deferred tax assets 158 180
I/S Total income taxes (919) (4,116)
Provisions have been made for estimated tax charges that may arise as
a result of prior tax audits. Tax processes are evaluated on a regular basis
and provisions are made for possible outcome when it is probable that the
Volvo Group will have to pay more taxes and when it is possible to make
a reasonably assessment of the possible outcome. Tax claims for which no
provision was deemed necessary were recognized as contingent liabilities.
At year-end 2013, the Volvo Group’s unused tax-loss carryforwards
amounted to 23,382 (18,396). These loss carryforwards expire according
to the table below:
Due date Dec 31, 2013 Dec 31, 2012
after 1 year 91 76
after 2 years 104 148
after 3 years 183 267
after 4 years 533 950
after 5 years 752 466
after 6 years or more 21,719 16,489
Total 23,382 18,396
The Swedish corporate income tax rate amounted to 22.0% (26.3) in
2013. The table below discloses the principal reasons for the difference
between this rate and the Volvo Group’s income tax rate, based on income
after fi nancial items.
2013,
%2012, %
Swedish corporate income tax rate 22 26
Difference in tax rate in various countries 6 3
Other non-taxable income (7) (3)
Other non-deductible expenses 5 1
Current taxes attributable to prior years (7) 1
Remeasurementof deferred tax assets (3) (1)
Otherdifferences 4 0
Income tax rate for the Group 20 27
Due to transfer of intellectual property within the Volvo Group, deferred
tax assets and tax liabilities have been revalued which has affected the
income tax in the income statement positively by 236.
ACCOUNTING POLICY
SOURCES OF ESTIMATION UNCERTAINTY
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NOTE 10 INCOME TAXES
134
FINANCIAL INFORMATION 2013