The Volvo Group’s recognized net sales pertain mainly to revenues from sales of goods and services. Net sales are, if the occasion arises, reduced by the value of discounts granted and by returns.
Revenue from the sale of goods is recognized when significant risks and rewards of ownership have been transferred to external parties, normally when the goods are delivered to the customer. However, if the sale of goods is combined with a buy-back agreement or a residual value guarantee, the transaction is recognized as an operating lease transaction if significant risks in regard to the goods are retained in Volvo Group. Revenue is then recognized over the period of the residual value commitment. If the residual value risk commitment is not significant or the sale was made to an independent party before Volvo Group is committed to the residual value risk the revenue is recognized at the time of sale and a provision is made to reflect the estimated residual value risk (). 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 service is provided. Interest income in conjunction with finance leasing or instalment contracts are recognized during the underlying contract period. Revenue for maintenance contracts are recognized in line with the allocation 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.
Sources of estimation uncertainty
Buy-back agreements and residual value guarantees
In certain cases, Volvo Group enters into a buy-back agreement or residual value guarantee after Volvo Group has 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 determined that such an assessment was incorrect, the Volvo Group’s recognized revenue and income for the period will decline and instead be distributed over several reporting periods.
, for a description of residual value risks.
Hard and soft products
The Volvo Group’s product range is divided into hard and soft products. The sale of new vehicles, machinery and engines comprise hard products. As from January 1, 2012 hard products also include sale of used vehicles and machines, trailers, superstructures and special vehicles. As from January 1, 2012 Soft products include services and aftermarket products.
Refer to World-class services for more information about the Volvo Group’s services.
Refer to for information regarding net sales by product and market.