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 2010 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 2011
In accordance with considerations presented in the Annual Report, Note 3, regarding new accounting principles for 2011, a number of new standards and IFRIC interpretations became effective January 1, 2011. They are expected not to have a significant effect on the financial statements of the Group.
Otherwise, accounting principles and methods of calculations have remained essentially unchanged from those applied in the 2010 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. As from January 1, 2011 unrealized changes in fair value of commercial derivates related to a receivable or payable is reported in the respective business area. All other unrealized changes in fair value of commercial derivates are reported in the income statement in the segment Group functions and others. This has positively affected the Group’s operating income by SEK 99 M during the first quarter whereof SEK 52 M in Group functions and other. In the fourth quarter 2010 the segment Group functions and other where negatively affected by SEK 269 M. During the first quarter of 2010 the effect was positive in an amount of SEK 28 M.
Group functions and other
As from January 1, 2011 Volvo will report some selected entities in the segment Group functions and other. As from January 1, 2011 Volvo Rents is reported in this segment. The reason for the change in segment is to strengthen the profile of Volvo Rents and make the operation more independent from Volvo CE.