Volvo 2014 Annual Report Download - page 148

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Credit loss reserves
An allowance for account receivables is recognized as soon as it is prob-
able that a credit loss has incurred, that is when there has been an event
that has triggered the customer’s inability to pay. As of December 31,
2014, the total credit loss reserves for account receivables amounted to
2.63% (2.02) of total account receivables.
Refer to Note 4 regarding credit risk.
SOURCES OF ESTIMATION UNCERTAINTY
!
NOTE 16 RECEIVABLES
Receivables are recognized at amortized cost. Changes to the credit loss
reserves as well as any interest and gain or loss upon divestment of
receivables are recognized in Other operating income and expense.
Refer to Note 30 under heading Derecognition of fi nancial assets, for
receivables subject to cash enhancement activities.
ACCOUNTING POLICIES
Customer-fi nancing receivables
(days/SEK M) payments due
Dec 31, 2014 Dec 31, 2013
Not due 1–30 31–90 >90 Total Not due 1–30 31–90 >90 Total
Overdue amount – 468 323 232 1,023 –8632796261,768
Valuation allowance for doubtful customer-fi nancing
receivables, specifi c reserve (116) (105) (57) (86) (364) (84) (70) (37)(125)(316)
Customer-fi nancing receivables, net book value (116) 363 266 146 659 (84) 793 242 501 1,452
Customer fi nancing receivables
total exposure
Dec 31, 2014 Dec 31, 2013
Not due 1–30 31–90 >90 Total Not due 1–30 31–90 >90 Total
Customer fi nancing receivables 89,931 8,012 2,410 263 100,616 74,517 7,956 2,095 471 85,040
Concentration of credit risk
Customer concentration
The ten largest customers in Customer Finance account for 7.0% (6.8) of
the total asset portfolio. The rest of the portfolio is pertinent to a large
number of customers. Hence the credit risk is spread across many mar-
kets and customers.
Concentration by geographical market
The adjacent table discloses the concentration of the customer-fi nancing
portfolio divided into geographical markets.
Read more in Note 4 about goals and policies in fi nancial risk management
and description of credit risks.
Read more about Volvo Financial Services’ development during the year on
page 81.
Geographic market, percentage
of customer-fi nancing portfolio (%).
Europe, 40.8%
North America, 36.0%
Asia, 9.3%
South America, 13.9%
The total contractual amount to which the overdue payments pertain are
presented in the table below. In order to provide for occurred but not yet
identifi ed customer-fi nancing receivables overdue, there were additional
reserves of 1,086 (863). The remaining exposure was secured by liens on
the purchased equipment and, in certain circumstances, other credit
enhancements such as personal guarantees, credit insurance, liens on
other property owned by the borrower etc.
Collaterals taken in possession that meet the criteria for recognition in
the Balance sheet amounted to SEK 137 M (132) as of December 31,
2014.
The table above presents overdue payments within the customer-fi nanc-
ing operations in relation to specifi c reserves. It is not unusual for a receiv-
able to be settled a couple of days after its due date, which impacts the
age interval of 1–30 days. Valuation allowance presented within the inter-
val not due, is mainly an effect of recognition of impairment on portions of
contracts that have not yet been invoiced.
FINANCIAL INFORMATION 2014
144