Volvo 2014 Annual Report Download - page 134

Subsidiaries
The Volvo Group has production facilities in 19 countries and sales of prod-
ucts in more than 190 markets which means that the Volvo Group has
subsidiaries in many parts of the world. A subsidiary is defi ned as an entity
that is controlled by the Volvo Group. A subsidiary is controlled by a parent
company when it has power over the investee, exposure, or rights, to varia-
ble returns from its involvement with the investee and the ability to use its
power over the investee to affect the amount of the investor’s return. Most
of the Volvo Group’s subsidiaries are owned to 100% by the Volvo Group
and are therefore considered to be controlled by the Volvo Group. For some
subsidiaries there are restrictions on the Volvo Group’s ability to access or
use cash from these subsidiaries.
Read more about cash that is not available or with other limitations in
Note 18, about minority interests in Note 11, about composition of the
Volvo Group for the parent company in Note 13.
Joint ventures
Joint ventures are companies over which the Volvo Group has controlling
infl uence together with one or more external parties. Joint ventures are
recognized by applying equity method accounting, in accordance with
IFRS 11 Joint arrangements. The investment in VE Commercial Vehicles
Ltd., (VECV) is of a business related nature and aims at strengthening the
Volvo Group’s position in India. The other two joint ventures owned by the
Volvo Group are also of business related nature.
Associated companies
Associated companies are companies in which the Volvo Group has a
signifi cant infl uence. A strong indication of such infl uence is when the
Group’s holdings equal at least 20% but less than 50% of the voting
rights. Holdings in associated companies are recognized in accordance
with the equity method. Deutz AG is a German manufacturer and is a
strategic supplier to the Volvo Group of medium duty engines. The invest-
ment in Deutz AG is of a business related nature and aims at expanding
our commercial co-operation in medium-duty engines.
Equity method
The Volvo Group’s share of income in companies recognized according to
the equity method is included in the consolidated income statement under
Income (loss) from investments in joint ventures and associated compa-
nies, less, where appropriate, depreciation of surplus values and the effect
of applying different accounting policies. Income from companies recog-
nized in accordance with the equity method is included in operating income
since the Volvo Group’s investments are of business related nature. For
practical reasons, some of the associated companies are included in the
consolidated fi nancial statements with a certain time lag, normally one
quarter. Dividends from joint ventures and associated companies are not
included in the consolidated income. In the consolidated balance sheet,
investments in joint ventures and associated companies are affected by the
Volvo Group’s share of the company’s net income, less depreciation of
surplus values and dividends received.
When applying the equity method, including recognizing the associ-
ate’s or joint venture’s losses, additional impairment losses might be rec-
ognized given any indication of impairment. A signifi cant or prolonged
decline in the fair value of the shares is an indication of impairment.
Investments accounted for in accordance with the equity method cannot
be of a negative carrying value and therefore losses are not provided for
if the holding is of a negative amount.
Other shares and participations
Holding of shares that do not provide the Volvo Group with signifi cant in-
fl uence, which generally means that Volvo Group’s holding of shares cor-
responds to less than 20% of the votes, are recognized as other shares
and participations. For listed shares, the carrying amount is equivalent to the
market value. Unlisted shares and participations, for which a fair value can-
not reasonably be determined, are measured at acquisition cost less any
impairment.
Any change in value is recognized directly in other comprehensive
income, unless the decline is signifi cant or prolonged. Then the impair-
ment is recognized in profi t and loss. The cumulative gain or loss recog-
nized in other comprehensive income is recycled in the income statement
on the sale of the asset.
Earned or paid interest attributable to these assets is recognized in the
income statement as part of net fi nancial items in accordance with the
effective interest method. Dividends received attributable to these assets
are recognized in the income statement as Income from other invest-
ments.
Joint ventures
The Volvo Group’s investments in joint ventures are listed below.
Shares in joint ventures Dec 31, 2014 Dec 31, 2013
Holding percentage Holding percentage
Shanghai Sunwin Bus Corp., China 50.0  50.0
DONGVO Truck Co., Ltd. (former
Dong Feng Nissan Diesel Motor
Co., Ltd.,) China 50.0  50.0
VE Commercial Vehicles, Ltd., India145.6 45.6
1 VE Commercial Vehicles Ltd., is considered to be a joint venture as Volvo Group
and Eicher Motors Ltd have signed an agreement which states that common
agreement is needed in relation to important questions related to the governance
of VECV.
ACCOUNTING POLICIES
INVESTMENTS IN JOINT VENTURES, ASSOCIATED
COMPANIES AND OTHER SHARES AND PARTICIPATIONS
NOTE 5
FINANCIAL INFORMATION 2014
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