As from January 1, 2013 Volvo applies the following accounting standards, IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosures of Interest in Other Entities amendments in IAS 27 Separate Financial Statements, amendments in IAS 28 Investments in Associates and Joint Ventures and the amendment in IAS 19 Employee Benefits. These standards are applied retrospectively and hence the income statement and balance sheet for 2012 are adjusted to reflect the changes in these new and amended accounting standards. IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosures of Interest in Other Entities and the amendments in IAS 27 Separate Financial Statements, see note 1, will not have a material effect on the Volvo Group and are not included in the restated numbers for 2012.
Restatement Joint ventures
IFRS 11 replaces IAS 31 Interests in Joint Ventures. Under IFRS 11, joint arrangements are classified as joint operations or joint ventures. A joint operation is a joint arrangement whereby the parties to the arrangement have rights to the assets, and obligations for the liabilities. A joint venture is a joint arrangement whereby the parties to the arrangement have rights to the net assets of the arrangement. Volvo Group’s joint arrangements are classified as joint ventures. Volvo Group has previously accounted for joint ventures using the proportional method and consolidated the assignable part item by item in the income statement and balance sheet.
Under IFRS 11, the option of proportional consolidation of joint ventures included in IAS 31 has been removed, and joint ventures shall be accounted for using the equity method in accordance with IAS 28. Investments in Associates and Joint Ventures (revised 2011). Assets and liabilities relating to the joint ventures are derecognized and a carrying amount corresponding to the net assets derecognized and including goodwill is recognized in the balance sheet, impairment test has been performed in accordance with the transition rules in IFRS 11. In accordance with the equity method, Volvo Group’s share of the joint venture’s profit or loss will be recognized as a one line item in the income statement, i.e. ”Income from investments in joint ventures and associates”. The corresponding amount will be recognized in the balance sheet as “Investment in joint ventures and associates”.
Read more about Volvo Group's Joint Ventures in Note 5.
Restatement Employee benefits
As from January 1, 2013 the amendment to IAS 19 Employee benefits is effective. The revised standard is applied retrospectively, and hence the opening balance for 2012 is adjusted in accordance with the revised IAS 19, and the reported numbers for 2012 is restated accordingly for comparison purposes.
The amended standard removes the option to use the corridor method which is used by the Volvo Group up to and including the financial year 2012. According to the revised IAS 19, discount rate is used when calculating the net interest income or expense on the net defined benefit liability (asset), hence the expected return is no longer used. All changes in the net defined liability or asset is recognized when they occur. Service cost and net interest is recognized in profit and loss, while remeasurements such as actuarial gains and losses is recognized in other comprehensive income. Special payroll tax is recognized as pension liability, special payroll tax is applicable for Sweden and Belgium. Amortization of actuarial gains and losses will cease with the removal of the corridor method.
Read more about provision for post-employment benefit in Note 20.