Volvo 2015 Annual Report Download - page 138

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,
2015, the total credit loss reserves for account receivables amounted to
4.02% (2.63) 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 Financial Instruments in section Derecognition of financial
assets, for receivables subject to cash enhancement activities.
ACCOUNTING POLICY
Concentration of credit risk
Customer concentration
The ten largest customers in Customer Finance account for 8.5% (7.0) 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 markets
and customers.
Concentration by geographical market
The adjacent table discloses the concentration of the customer-financing
portfolio divided into geographical markets.
Read more in Note 4 about goals and policies in financial risk management
and description of credit risks.
Read more about Volvo Financial Services’ development during the year in
the Board of Directors’ Report on Volvo Financial Services.
15:7
Customer-financing receivables
total exposure
Dec 31, 2015 Dec 31, 2014
Not due 1–30 31–90 >90 Total Not due 1–30 31–90 >90 Total
Customer financing receivables 94,126 7,764 1,962 245 104,096 89,931 8,012 2,410 263 100,616
yet identified customer-financing receivables overdue, there were addi-
tional reserves of 1,149 (1,086), included in table 15:4. The remaining
exposure was secured by liens on the financed 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 162 M (137) as of December 31,
2015.
The table above presents overdue payments within the customer-financ-
ing operations in relation to specific 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.
The total contractual amount to which the overdue payments pertain
are presented in the table below. In order to provide for occurred but not
15:6
Overdues in relation to specific reserves
for customer-financing receivables
Dec 31, 2015 Dec 31, 2014
Not
due 1–30 31–90 >90 Total Not due 1–30 31–90 >90 Total
Overdue amount – 477 268 292 1,037 – 468 323 232 1,023
Valuation allowance for doubtful customer-financing
receivables, specific reserve –94 –57 –90 –124 –365 –116 –105 –57 –86 –364
Customer-financing receivables, net book value –94 420 178 168 672 –116 363 266 146 659
Geographic market, percentage
of customer-financing portfolio (%).
Europe, 39.3%
North America, 43.4%
Asia, 7.1%
South America, 10.2%
15:8
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GROUP PERFORMANCE 2015 NOTES