Volvo 2015 Annual Report Download - page 130

Specification of income tax rate 2015, % 2014, %
Swedish corporate income tax rate 22 22
Difference in tax rate in various countries 3 8
Other non-taxable income –6 –12
Other non-deductible expenses 1 27
Current taxes attributable to prior years –1 –4
Remeasurementof deferred tax assets 6 10
Otherdifferences 1 5
Income tax rate for the Volvo Group126 56
1 The income tax rate for the Volvo Group, as of December 31 2015, was mainly a
result of the non-taxable capital gain from the divestment of shares in Eicher Motors
Ltd of SEK 4,608 M which gave rise to a permanent tax difference of SEK 1,014 M.
The positive effect from the capital gain was partly offset by the impact of the valua-
tion allowance and the revaluation of deferred tax assets in Japan of SEK –1,107 M
as a result of changed corporate tax rate, stricter conditions for utilization of tax-loss
carryforwards and review of business performance.
Specification of deferred tax assets
and tax liabilities Dec 31, 2015 Dec 31, 2014
Deferred tax assets: 
Unused tax-loss carryforwards 3,724 5,911
Other unused tax credits 192 152
Intercompany profitin inventories 1,339 1,299
Allowance for inventory obsolescence 639 615
Valuation allowance for doubtful receivables 1,211 802
Provisions for warranties 4,111 3,726
Provisions for residual value risks 247 249
Provisions for post-employmentbenefits 4,408 4,974
Provisions for restructuring measures 262 223
Market value of derivative instruments 25 27
Land 1,160 1,226
Other deductible temporary differences 4,930 4,936
Deferred tax assets before deduction
for valuation allowance 22,248 24,140
Valuation allowance –1,181 –336
Deferred tax assets after deduction
for valuation allowance 21,067 23,804
Netting of deferred tax assets/liabilities –7,617 –7,973
B/S Deferred tax assets, net 13,450 15,831
Deferred tax liabilities:
Accelerated depreciation on property,
plant and equipment 2,163 2,156
Accelerated depreciation on leasing assets 3,174 2,836
LIFO valuation of inventories 557 558
Capitalized product and software development 2,384 2,472
Adjustment to fair valueat corporate
acquisitions/divestitures 30 34
Untaxed reserves 87 84
Provisions for post-employment benefits 69 39
Other taxable temporary differences 2,648 2,590
Deferred tax liabilities 11,112 10,769
Netting of deferred tax assets/liabilities –7,617 –7,973
B/S Deferred tax liabilities, net 3,495 2,796
Deferred tax assets/liabilities, net19,955 13,035
1 The deferred tax assets and liabilities above are partially recognized in the balance
sheet on a net basis after taking into account offsetting possibilities. Deferred
tax assets and liabilities have been measured at the tax rates that are expected
to apply during the period when the asset is realized or the liability is settled,
according to the tax rates and tax regulations that have been resolved or enacted at
the balance-sheet date.
Income tax for the period includes current and deferred taxes. Current
taxes are calculated on the basis of the tax regulations prevailing in the
countries where the Group companies have operations.
Deferred taxes are recognized on differences that arise between the
taxable value and carrying value of assets and liabilities as well as on tax-
loss carryforwards. Furthermore deferred taxes are recognized to the
extent it is probable that they will be utilized against taxable income.
Deferred tax liabilities on temporary differences on participations in
subsidiaries and associated companies are recognized in the balance
sheet except when the Volvo Group control the timing of the reversal of
the temporary difference related to accumulated undistributed earnings
and it is probable that a reversal will not be done in the foreseeable future.
Tax laws in Sweden and certain other countries allow companies to defer
payment of taxes through allocations to untaxed reserves. However, in the
consolidated financial statements untaxed reserves are reclassified to
deferred tax liability and equity. In the consolidated income statements a
provision to, or reversal of, untaxed reserves is split between deferred
taxes and net income for the year.
Provisions have been made for estimated tax charges that are probable
as a result of identified tax risks. Tax processes are evaluated on a regular
basis and provisions are made for possible outcome when it is probable that
the Volvo Group will have to pay more taxes and when it is possible to make
a reasonably assessment of the possible outcome. Tax claims for which no
provision is deemed necessary are generally recognized as contingent lia-
bilities.
Read more about contingent liabilities in Note 24.
SOURCES OF ESTIMATION UNCERTAINTY
!
The Volvo Group recognizes valuation allowances for deferred tax assets
where management does not expect such assets to be realized based
upon current forecasts. In the event that actual results differ from these
estimates or adjustments are made to future periods in these estimates,
changes in the valuation allowance may be required. This could have sig-
nificant impact on the financial position and the income for the period.
The Volvo Group has substantial tax-loss carryforwards that are
assessed as being probable to be utilized due to sufficient income gener-
ated in the coming years. The base for this assessment is possibilities to
offset tax assets and tax liabilities and that a significant part of tax-loss
carryforwards is related to countries with long or indefinite periods of
utilization. Ensuring the probability of utilization is based upon business
plans when relevant.
Income taxes were distributed as follows:
Distribution of Income taxes 2015 2014
Current taxes relating to the period –3,207 –3,383
Adjustment of current taxes for prior periods 197 198
Deferred taxes originated or reversed during the
period –965 362
Remeasurementsof deferred tax assets –1,345 –31
I/S Total income taxes –5,320 –2,854
The Swedish corporate income tax rate amounted to 22% in 2015. The table
at the top of the next column discloses the principal reasons for the differ-
ence between this rate and the Volvo Group’s income tax rate, based on
income after financial items.
ACCOUNTING POLICY
NOTE 10 INCOME TAXES
128
GROUP PERFORMANCE 2015 NOTES