Volvo 2014 Annual Report Download - page 147

ACCOUNTING POLICIES
Credit loss reserves
The assessment of credit loss reserves on customer-financing receiva-
bles is dependent on estimates including assumptions regarding past
dues, repossession rates and the recovery rate on the underlying collater-
als. The impairment requirement is primarily evaluated for each respective
asset. If, based on objective grounds, it cannot be determined that one or
more assets are subject to an impairment loss, the assets are grouped in
units based, for example, on similar credit risks to evaluate the impairment
loss requirement collectively. This is in order to cover credit losses incurred
but not yet individually identified in a larger population. Individually
impaired assets or assets impaired during previous periods are not
included when grouping assets for collective assessment. If the condi-
tions that gave rise to the recognition of an impairment loss later prove to
no longer be valid the impairment loss is reversed in the income statement
as long as the carrying amount does not exceed the amortized cost at the
time of the reversal.
As of December 31, 2014, the total credit loss reserves in the Cus-
tomer Finance segment amounted to 1.33% (1.31) of the total credit port-
folio in the segment. This reserve ratio, which is used as an important
measure for the Customer Finance segment, includes operating leases
and inventory, whereas this note specifies the balance sheet item Cus-
tomer Finance receivables for the Volvo Group and thereby excludes
operating leases and inventory as they are recognized elsewhere in the
balance sheet.
Read more in Note 4 for a description of the credit risk, interest and currency
risks and in Note 30 for further information regarding customer-financing
receivables.
Non-current customer-financing receivables
Non-current customer-financing
receivables Dec 31, 2014 Dec 31, 2013
Installment credits 28,055 21,850
Financial leasing 21,820 21,040
Other receivables 1,455 902
B/S Non-current customer financing
receivables 51,331 43,792
The effective interest rate for non-current customer-financing receivables
amounted to 4.96% (5.61) as of December 31, 2014.
SOURCES OF ESTIMATION UNCERTAINTY
!
Interest income on the customer- financing receivables is recognized
within sales. Changes to the credit loss reserves are recognized in Other
operating income and expense.
2019
3,882
2020 or later
1,137
2018
8,495
2017
15,209
2016
22,608
Non-current customer- financing
receivables maturities
SEK M
NOTE 15 CUSTOMER-FINANCING RECEIVABLES
Current customer-financing receivables
Current customer-financing receivables Dec 31,
2014 Dec 31, 2013
Installment credits 14 , 6 11 11 , 5 97
Financial leasing 14,617 13,808
Dealerfinancing 17,562 13,676
Other receivables 1,046 988
B/S Current customer financing receivables 47,836 40,069
The effective interest rate for current customer-financing receivables
amounted to 5.31% (5.63) as of December 31, 2014.
Credit risk in customer-financing receivables
Customer-financing receivables,
net of allowance Dec 31, 2014 Dec 31, 2013
Customer-financing receivables gross 100,616 85,040
Valuation allowance for doubtful customer-financing
receivables (1,450) (1,179)
Whereof specific reserve (364) (316)
Whereof other reserve (1,086) (863)
Customer-financing receivables, net 99,166 83,861
Change of valuation allowance for doubtful
customer-financing receivables 2014 2013
Opening balance 1,179 1,091
New valuation allowance charged to income 1,081 1,292
Reversal of valuation allowance charged to income (161) (437)
Utilization of valuation allowance related to
actual losses (752) (731)
Translation differences 103 (36)
Valuation allowance for doubtful customer-financing
receivables as of December 31 1,450 1,179
FINANCIAL INFORMATION 2014
143