As from January 1, 2005, AB Volvo applies the International Financial Reporting Standards (IFRS) as adopted by the EU, for the group consolidation. The accounting principles, which were applied during the preparation of this report, are described in Note 1 to the consolidated financial statements, which is included in the 2009 Annual Report for the Volvo Group. This interim report has been prepared in accordance with IAS 34, Interim Financial Reporting and the Annual Accounts Act.
The financial reporting of the parent company has been prepared in accordance with the Annual Accounts Act and RFR 2 Reporting for legal entities. Application of RFR 2 entails that in interim reporting for legal entities, the parent company is to apply all IFRSs and interpretations approved by the EU as far as possible within the framework of the Swedish Annual Accounts Act, the Pension Obligations Vesting Act, and taking into account the connection between accounting and taxation.
New accounting principles in 2010
In accordance with considerations presented in the Annual Report, Note 3, regarding new accounting principles for 2010, a number of new standards and IFRIC interpretations became effective January 1, 2010.
Revised IFRS 3 Business combinations
The standard became effective on July 1, 2009 and applies to fiscal years beginning on or after that date. The standard entails changes to the reporting of future acquisitions regarding for example the accounting of transaction costs, any contingent considerations and step acquisitions. Further information regarding the financial impact is available in note 3 to the consolidated financial statements, included in the 2009 Annual Report for the Volvo Group.
IAS 27 amendment Consolidated and separate financial statements
The standard became effective on July 1, 2009, as a consequence of the revised IFRS 3, and applies to fiscal years beginning on or after that date. The amendment brings about changes in IAS 27 regarding for example how to report changes to the ownership in cases where the parent company retains or loses the control of the owned entity. The Group applies the amendment as of January 1, 2010. The application will prospectively affect the accounting for business combinations made from the application date.
Other new amendments to standards and IFRIC interpretations applied by the Volvo Group from January 1, 2010, have no significant effect on the financial statements of the Group, in accordance with what has been communicated in Note 3 of the Annual Report.
Otherwise, accounting principles and methods of calculations have remained essentially unchanged from those applied in the 2009 Annual Report.
Hedging of commercial currency flows
Volvo only hedges firm flows whereof the major part is realized within 6 months. Hedge accounting is not applied and unrealized gains and losses from fluctuations in the fair values of the contracts are reported in the income statement in the segment Group headquarter functions and other. This has negatively affected the Group’s operating income by SEK 269 M during the fourth quarter. When the contracts have been realised the income effect will be reported within the respective segments.
As from January 1, 2011 unrealized changes in fair value of commercial derivates related to a receivable or payable will be reported in the respective business area. All other unrealized changes in fair value of commercial derivates will henceforth be reported in the income statement in the segment Group headquarter functions and others.