Volvo 2015 Annual Report Download - page 129

OTHER OPERATING INCOME
AND EXPENSES
NOTE 8
Changes in provisions for doubtful accounts receivable and customer-
financing receivables are recognized in Other operating income and expenses.
Other operating income and expense 2015 2014
Gains/losses on divestment of Group companies1341 1,023
Change in allowances and write-offsfor
doubtful customer-financing receivables –817 –858
Change in allowances and write-offsfor
other doubtful receivables –549 –355
Damages and litigations2471 –4,420
Restructuring costs3–2,346 –2,571
Volvo profit sharing program –455 –
Other income and expenses4–824 –516
I/S Total –4,179 –7,697
1 2014 included the result from divestment of commercial real estate and the
Volvo Rents closure of accounts.
2 Including SEK 809 M from the favorable outcome in an arbitration case. 2014
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.
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 significant 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.
Read more in 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 defined as the
sale of maintenance service and other aftermarket products.
During 2015, the Services & Aftermarket business represented approx-
imately 25% (26) of the Volvo Group’s net sales.
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 finance 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 flow exposure in foreign currency are recognized in other
financial income and expenses. Hedge accounting is not applied on those
derivatives.
Read more in Note 1 about the accounting policy for receivables and liabili-
ties in foreign currency.
Read more in Note 30 Financial Instruments regarding the accounting
policy for financial assets at fair value through the income statement.
Other financial income and expense 2015 2014
Gains and losses on derivatives used to hedge
interest rate exposure –28 447
Gains and losses on derivatives used to hedge
foreign cash flow exposure –426 640
Financial instruments at fair value
through profit or loss –454 1,087
Exchange rate gains and losses on financial assets
and liabilities –89 89
Financial income and expenses related to taxes 1 63
Costs for Treasury function, credit facilities, etc –250 –308
I/S Total1–792 931
The unrealized loss from derivatives used to hedge interest rate exposure
were mainly related to the Customer Finance portfolio and Industrial
Operations debt portfolio. The unrealized and realized losses from deriva-
tives used to hedge future cash flow exposure in foreign currency were
mainly related to derivatives used to hedge future firm cash flows of SEK
545 M (neg 438), offset by a gain related to the hedging of the cash flow
of the acquisition of Dongfeng Commercial vehicles by SEK 119 M (1,078).
1 Other financial income and expense attributable to financial instruments
amounted to neg SEK 543 M (1,176) and is included in the table presenting
gains, losses interest income and expenses related to financial instruments in
note 30 Financial Instruments.
3 Restructuring costs related mainly to the Volvo Group wide efficiency program
which impacted the Group with an amount of SEK 2,333 M (2,569).
4 Including SEK 376 M (523) of the provision for expected credit losses for Volvo
CE in China of SEK 747 M (660). SEK 349 M (83) was reported as change in
allowance for doubtful receivables, and SEK 22 M (54) 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 financial risk management.
Read more about damages and litigations in Note 21 Other provisions and
Note 24 Contingent liabilities.
Read more about the efficiency program on page 23.
GROUP PERFORMANCE 2015 NOTES
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