Volvo 2014 Annual Report Download - page 139

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 2014 2013
Gains/losses on divestment of Group companies11,023 144
Revaluation of assets held for sale2– (1,458)
Change in allowances and write-offsfor
doubtful customer-fi nancing receivables (858) (923)
Change in allowances and write-offsfor
other doubtful receivables (355) (299)
Damages and litigations3(4,420) (117)
Restructuring costs4(2,571) (707)
Other income and expenses5(516) (194)
I/S Total (7,697) (3,554)
1 Including SEK 775 M out of the total result from divestment of commercial real
estate of SEK 815 M. Remaining SEK 40 M was reported as a gain on sale of
property, plant and equipment and included in the line Other income and
expenses. SEK 212 M related to the Volvo Rents ongoing closure of accounts.
2 Including revaluation of Volvo Rents in 2013.
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 having sold the product to an independent 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 deter-
mined that such an assessment is incorrect, the Volvo Group’s recognized
revenue and income for the period will decline and instead be distributed
over several reporting periods.
Refer also to Note 21, Other provisions, for a description of residual value
risks.
Vehicle and Service & Aftermarket
The Volvo Group’s product range is divided into Vehicle and Service &
Aftermarket. The sale of new vehicles, machinery and engines comprise
Vehicle as well as the sale of used vehicles and machines, trailers, super-
structures and special vehicles. Service & Aftermarket are defi ned as the
sale of maintenance service and other aftermarket products.
During 2014, the Services & Aftermarket business represented approx-
imately 26% (27) of the Volvo Group’s net sales.
Read more on page 50 about the Volvo Group’s services.
Read more in Note 6 regarding net sales by product and market.
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 instalment con-
tracts are recognized during the underlying contract period.
Revenue for maintenance contracts are recognized in line with the allo-
cation 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
OTHER FINANCIAL INCOME
AND EXPENSES
NOTE 9
Unrealized gains and losses on derivatives used to hedge interest rate
exposure and unrealized and realized gains and losses used to hedge
future cash fl ow exposure in foreign currency are recognized in other
fi nancial income and expenses. Hedge accounting is not applied on those
derivatives.
Read more in Note 30 Financial Instruments regarding the accounting
policy for fi nancial assets at fair value through the income statement.
Other fi nancial income and expense 2014 2013
Gains and losses on derivatives used to hedge
interest rate exposure 447 (66)
Gains and losses on derivatives used to hedge
foreign cash fl ow exposure 640 274
Financial instruments at fair value
through profi t or loss 1,087 208
Exchange rate gains and losses on fi nancial assets
and liabilities 89 101
Financial income and expenses related to taxes 63 (22)
Costs for Treasury function, credit facilities, etc (308) (276)
I/S Total1931 11
The unrealized gains from derivatives used to hedge interest rate expo-
sure are mainly related to the Customer Finance portfolio and Industrial
Operations debt portfolio. The unrealized and realized gains from deriva-
tives used to hedge future cash fl ow exposure in foreign currency were
primarily an effect of SEK 1,078 M (283) from derivatives used to hedge
future cash fl ow of the acquisition of Dongfeng Commercial Vehicles, off-
set by the unrealized and realized losses of SEK negative 429 M (positive
73) from derivatives used to hedge future fi rm cash fl ows.
1 Other fi nancial income and expenses attributable to fi nancial instruments
amounted to SEK 1,176 M (309).
3 Including provision related to the EU antitrust investigation of SEK 3,790 M and
the provision related to the engine emission case in the U.S of SEK 422 M.
4 Restructuring costs related mainly to the Volvo Group wide effi ciency program
which impacted the Group with an amount of SEK 2,569 M (715).
5 Including SEK 523 M out of the total provision for expected credit losses for
Volvo CE of SEK 660 M. SEK 83 M was reported as change in allowance for
doubtful receivables, and SEK 54 M was reported within gross income.
Read more about gains/losses on divestment of Group companies in Note 3
Acquisitions and divestments of shares in subsidiaries.
Read more regarding the company’s management of credit risk and credit
reserves in Note 4 Goals and policies in fi nancial risk management.
Read more about damages and litigations in Note 21 Other provisions and
Note 24 Contingent liabilities.
Read more about the effi ciency program on pages 24, 72 and 76.
FINANCIAL INFORMATION 2014
135