Additional Balance Sheet Disclosures in accordance with IFRS 7 (Financial Instruments)

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CARRYING AMOUNT OF FINANCIAL INSTRUMENTS BY IAS 39 MEASUREMENT CATEGORY

€ million

 

Dec. 31, 2013

 

Dec. 31, 2012

 

 

 

 

 

Financial assets at fair value through profit or loss

 

373

 

556

Loans and receivables

 

111,010

 

102,451

Available-for-sale financial assets

 

12,435

 

11,306

Financial liabilities at fair value through profit or loss

 

762

 

607

Financial liabilities measured at amortized cost

 

147,346

 

138,506

RECONCILIATION OF BALANCE SHEET ITEMS TO CLASSES OF FINANCIAL INSTRUMENTS

The following table shows the reconciliation of the balance sheet items to the relevant classes of financial instruments, broken down by the carrying amount and fair value of the financial instruments.

The fair value of financial instruments measured at amortized cost, such as receivables and liabilities, is calculated by discounting using a market rate of interest for a similar risk and matching maturity. For reasons of materiality, the fair value of current balance sheet items is generally deemed to be their carrying amount.

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RECONCILIATION OF BALANCE SHEET ITEMS TO CLASSES OF FINANCIAL INSTRUMENTS AS OF DECEMBER 31, 2012

 

 

MEASURED AT FAIR VALUE

 

MEASURED AT AMORTIZED COST

 

NOT WITHIN SCOPE OF IFRS 7

 

BALANCE SHEET ITEM AT DEC. 31, 2012

€ million

 

Carrying amount

 

Carrying amount

 

Fair value

 

Carrying amount

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent assets

 

 

 

 

 

 

 

 

 

 

Equity-accounted investments

 

 

 

 

7,309

 

7,309

Other equity investments

 

2,606

 

1,265

 

1,265

 

 

3,870

Financial services receivables

 

 

49,785

 

50,491

 

 

49,785

Other financial assets

 

2,226

 

4,206

 

4,279

 

 

6,431

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

Trade receivables

 

 

10,099

 

10,099

 

 

10,099

Financial services receivables

 

 

36,911

 

36,911

 

 

36,911

Other financial assets

 

832

 

5,041

 

5,041

 

 

5,872

Marketable securities

 

7,433

 

 

 

 

7,433

Cash, cash equivalents and time deposits

 

 

18,488

 

18,488

 

 

18,488

 

 

 

 

 

 

 

 

 

 

 

Noncurrent liabilities

 

 

 

 

 

 

 

 

 

 

Noncurrent financial liabilities

 

 

63,603

 

66,183

 

 

63,603

Other noncurrent financial liabilities

 

1,587

 

810

 

816

 

 

2,397

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

Put options and compensation rights granted to noncontrolling interest shareholders

 

 

 

 

 

Current financial liabilities

 

 

54,060

 

54,060

 

 

54,060

Trade payables

 

 

17,268

 

17,268

 

 

17,268

Other current financial liabilities

 

1,230

 

3,195

 

3,195

 

 

4,425

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RECONCILIATION OF BALANCE SHEET ITEMS TO CLASSES OF FINANCIAL INSTRUMENTS AS OF DECEMBER 31, 2013

 

 

MEASURED AT FAIR VALUE

 

MEASURED AT AMORTIZED COST

 

NOT WITHIN SCOPE OF IFRS 7

 

BALANCE SHEET ITEM AT DEC. 31, 2013

€ million

 

Carrying amount

 

Carrying amount

 

Fair value

 

Carrying amount

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent assets

 

 

 

 

 

 

 

 

 

 

Equity-accounted investments

 

 

 

 

7,934

 

7,934

Other equity investments

 

2,666

 

1,274

 

1,274

 

 

3,941

Financial services receivables

 

 

51,198

 

53,200

 

 

51,198

Other financial assets

 

2,414

 

4,626

 

4,593

 

 

7,040

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

Trade receivables

 

 

11,133

 

11,133

 

 

11,133

Financial services receivables

 

 

38,386

 

38,386

 

 

38,386

Other financial assets

 

1,680

 

4,911

 

4,911

 

 

6,591

Marketable securities

 

8,492

 

 

 

 

8,492

Cash, cash equivalents and time deposits

 

 

23,178

 

23,178

 

 

23,178

 

 

 

 

 

 

 

 

 

 

 

Noncurrent liabilities

 

 

 

 

 

 

 

 

 

 

Noncurrent financial liabilities

 

 

61,517

 

62,810

 

 

61,517

Other noncurrent financial liabilities

 

1,169

 

1,136

 

1,153

 

 

2,305

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

Put options and compensation rights granted to noncontrolling interest shareholders

 

 

3,638

 

3,563

 

 

3,638

Current financial liabilities

 

 

59,987

 

59,987

 

 

59,987

Trade payables

 

 

18,024

 

18,024

 

 

18,024

Other current financial liabilities

 

1,070

 

3,456

 

3,456

 

 

4,526

Uniform valuation techniques and inputs are used to measure fair value. The fair value of Level 2 and 3 financial instruments is measured in the individual divisions on the basis of Group-wide specifications. The measurement techniques used are explained in the disclosures on accounting policies. The fair value of put options and compensation rights granted to noncontrolling interest shareholders is calculated using a present value model based on the contractually agreed cash settlement, including cash compensation, as well as the minimum statutory interest rate and a risk-adjusted discount rate for a matching maturity. For further information, please see the disclosures on the basis of consolidation. The fair value of Level 3 receivables was measured by reference to individual expectations of losses; these are based to a significant extent on the Company’s assumptions about counterparty credit quality.

The following table contains an overview of the financial assets and liabilities measured at fair value by level:

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FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE BY LEVEL

€ million

 

Dec. 31, 2012

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

Financial assets at fair value through profit or loss

 

 

 

 

 

 

 

 

Derivatives

 

3,057

 

 

2,939

 

119

 

 

 

 

 

 

 

 

 

Available-for-sale financial assets

 

 

 

 

 

 

 

 

Other equity investments

 

2,606

 

2,606

 

 

Marketable securities

 

7,433

 

7,419

 

14

 

Financial assets measured at fair value

 

13,096

 

10,025

 

2,953

 

119

 

 

 

 

 

 

 

 

 

Financial liabilities at fair value through profit or loss

 

 

 

 

 

 

 

 

Derivatives

 

2,818

 

 

2,757

 

60

Financial liabilities measured at fair value

 

2,818

 

 

2,757

 

60

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€ million

 

Dec. 31, 2013

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

Financial assets at fair value through profit or loss

 

 

 

 

 

 

 

 

Derivatives

 

4,094

 

 

4,062

 

32

 

 

 

 

 

 

 

 

 

Available-for-sale financial assets

 

 

 

 

 

 

 

 

Other equity investments

 

2,666

 

2,666

 

 

Marketable securities

 

8,492

 

8,410

 

83

 

Financial assets measured at fair value

 

15,252

 

11,076

 

4,144

 

32

 

 

 

 

 

 

 

 

 

Financial liabilities at fair value through profit or loss

 

 

 

 

 

 

 

 

Derivatives

 

2,239

 

 

2,021

 

218

Financial liabilities measured at fair value

 

2,239

 

 

2,021

 

218

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FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT AMORTIZED COST BY LEVEL

€ million

 

Dec. 31, 2012

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

Fair value of financial assets measured at amortized cost

 

 

 

 

 

 

 

 

Other equity investments

 

1,265

 

 

226

 

1,039

Financial services receivables

 

87,402

 

 

85,361

 

2,041

Trade receivables

 

10,099

 

 

9,998

 

100

Other financial assets

 

9,320

 

39

 

9,266

 

14

Cash, cash equivalents and time deposits

 

18,488

 

17,816

 

672

 

Fair value of financial assets measured at amortized cost

 

126,573

 

17,855

 

105,524

 

3,195

 

 

 

 

 

 

 

 

 

Fair value of financial liabilities measured at amortized cost

 

 

 

 

 

 

 

 

Put options and compensation rights granted to noncontrolling interest shareholders

 

 

 

 

Trade payables

 

17,268

 

 

17,268

 

Financial liabilities

 

120,242

 

21,568

 

98,674

 

Other financial liabilities

 

4,010

 

2

 

4,003

 

5

Fair value of financial liabilities measured at amortized cost

 

141,521

 

21,571

 

119,945

 

5

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€ million

 

Dec. 31, 2013

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

Fair value of financial assets measured at amortized cost

 

 

 

 

 

 

 

 

Other equity investments

 

1,274

 

 

186

 

1,088

Financial services receivables

 

91,586

 

 

89,889

 

1,698

Trade receivables

 

11,133

 

 

10,999

 

134

Other financial assets

 

9,504

 

166

 

9,313

 

26

Cash, cash equivalents and time deposits

 

23,178

 

22,013

 

1,165

 

Fair value of financial assets measured at amortized cost

 

136,675

 

22,179

 

111,551

 

2,945

 

 

 

 

 

 

 

 

 

Fair value of financial liabilities measured at amortized cost

 

 

 

 

 

 

 

 

Put options and compensation rights granted to noncontrolling interest shareholders

 

3,563

 

 

 

3,563

Trade payables

 

18,024

 

 

18,024

 

Financial liabilities

 

122,797

 

20,905

 

101,728

 

165

Other financial liabilities

 

4,609

 

63

 

4,507

 

40

Fair value of financial liabilities measured at amortized cost

 

148,993

 

20,967

 

124,258

 

3,768

The allocation of fair values to the three levels in the fair value hierarchy is based on the availability of observable market prices in an active market. Level 1 is used to report the fair value of financial instruments for which a quoted price is available. Examples include marketable securities and other equity investments measured at fair value. Fair values in Level 2, e.g. of derivatives, are measured on the basis of market inputs such as exchange rates or yield curves using market-based valuation techniques. Level 3 fair values are calculated using valuation techniques that incorporate inputs that are not directly observable in active markets. In the Volkswagen Group, Level 3 fair values comprise long-term commodity futures because the prices available on the market must be extrapolated for measurement purposes. Options on equity instruments and residual value protection models are also reported in Level 3.

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CHANGES IN BALANCE SHEET ITEMS MEASURED AT FAIR VALUE BASED ON LEVEL 3

€ million

 

Financial assets measured at fair value

 

Financial liabilities measured at fair value

 

 

 

 

 

Balance at Jan. 1, 2012

 

8,584

 

595

Foreign exchange differences

 

0

 

0

Total comprehensive income

 

1,784

 

486

recognized in profit or loss

 

1,785

 

423

recognized in other comprehensive income

 

–1

 

63

Additions (purchases)

 

 

Sales and settlements

 

–10,199

 

21

Transfers into Level 2

 

–51

 

–28

Balance at Dec. 31, 2012

 

119

 

60

 

 

 

 

 

Total gains or losses recognized in profit or loss

 

1,785

 

423

Net other operating expense/income

 

9

 

–3

of which attributable to assets/liabilities held at the reporting date

 

–13

 

24

Financial result

 

1,776

 

426

of which attributable to assets/liabilities held at the reporting date

 

3

 

–228

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€ million

 

Financial assets measured at fair value

 

Financial liabilities measured at fair value

 

 

 

 

 

Balance at Jan. 1, 2013

 

119

 

60

Foreign exchange differences

 

0

 

0

Total comprehensive income

 

–70

 

–197

recognized in profit or loss

 

–63

 

–182

recognized in other comprehensive income

 

–7

 

–16

Additions (purchases)

 

2

 

2

Sales and settlements

 

–8

 

20

Transfers into Level 2

 

–11

 

–22

Balance at Dec. 31, 2013

 

32

 

218

 

 

 

 

 

Total gains or losses recognized in profit or loss

 

–63

 

–182

Net other operating expense/income

 

 

of which attributable to assets/liabilities held at the reporting date

 

 

Financial result

 

–63

 

–182

of which attributable to assets/liabilities held at the reporting date

 

–65

 

–184

The transfers between the levels of the fair value hierarchy are reported at the respective reporting dates. The transfers out of Level 3 into Level 2 comprise commodity futures for which observable quoted prices are now available again for measurement purposes due to the decline in their remaining maturities; consequently, no extrapolation is required. There were no transfers between other levels of the fair value hierarchy.

Commodity prices are the key risk variable for the fair value of commodity futures. Sensitivity analyses are used to present the effect of changes in commodity prices on profit after tax and equity.

If commodity prices for commodity futures classified as Level 3 had been 10% higher (lower) as of December 31, 2013, profit would have been €6 million (previous year: €4 million) higher (lower) and equity would have been €9 million (previous year: €18 million) higher (lower).

The key risk variable for measuring options on equity instruments held by the Company is the relevant enterprise value. Sensitivity analyses are used to present the effect of changes in risk variables on profit.

If the assumed enterprise values had been 10% higher, profit would have been €12 million (previous year:  €14 million) higher. If the assumed enterprise values had been 10% lower, profit would have been €21 million (previous year: €25 million) lower.

Residual value risks result from hedging agreements with dealers under which earnings effects caused by market-related fluctuations in residual values that arise from buy-back obligations under leases are borne in part by the Volkswagen Group.

The key risk variable influencing the fair value of the options relating to residual value risks is used car prices. Sensitivity analyses are used to quantify the effects of changes in used car prices on earnings after tax.

If the prices for the used cars covered by the residual value protection model had been 10% higher as of December 31, 2013, profit after tax would have been €169 million higher. If the prices for the used cars covered by the residual value protection model had been 10% lower as of December 31, 2013, profit after tax would have been €169 million lower.

OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES

The following tables contain information about the effects of offsetting in the balance sheet and the potential financial effects of offsetting in the case of instruments that are subject to a legally enforceable master netting arrangement or a similar agreement.

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AMOUNTS THAT ARE NOT SET OFF IN THE BALANCE SHEET

 

€ million

Gross amounts of reco­gnized financial assets

Gross amounts of reco­gnized financial liabi­lities set off in the balance sheet

Net amounts of financial assets prese­nted in the balance sheet

Financial instru­ments

Collateral received

Net amount at Dec. 31, 2012

 

 

 

 

 

 

 

Derivatives

3,057

3,057

–1,833

1,224

Financial services receivables

86,958

–262

86,696

–35

86,661

Trade receivables

10,198

–99

10,099

0

–290

9,808

Marketable securities

7,433

7,433

7,433

Cash, cash equivalents and time deposits

18,488

18,488

18,488

Other financial assets

13,197

–80

13,117

–3

13,114

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AMOUNTS THAT ARE NOT SET OFF IN THE BALANCE SHEET

 

€ million

Gross amounts of reco­gnized financial assets

Gross amounts of reco­gnized financial liabi­lities set off in the balance sheet

Net amounts of financial assets prese­nted in the balance sheet

Financial instru­ments

Collateral received

Net amount at Dec. 31, 2013

 

 

 

 

 

 

 

Derivatives

4,094

4,094

–1,101

2,992

Financial services receivables

89,870

–286

89,584

–31

89,554

Trade receivables

11,269

–135

11,133

0

–348

10,786

Marketable securities

8,492

8,492

8,492

Cash, cash equivalents and time deposits

23,178

23,178

23,178

Other financial assets

13,520

–42

13,478

–1

13,478

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AMOUNTS THAT ARE NOT SET OFF IN THE BALANCE SHEET

 

€ million

Gross amounts of reco­gnized financial liabi­lities

Gross amounts of reco­gnized financial assets set off in the balance sheet

Net amounts of financial liabi­lities prese­nted in the balance sheet

Financial instru­ments

Collateral pledged

Net amount at Dec. 31, 2012

 

 

 

 

 

 

 

Put options and compensation rights granted to noncontrolling interest shareholders

Derivatives

2,818

2,818

–1,785

1,032

Financial liabilities

117,663

117,663

–1,769

115,894

Trade payables

17,340

–72

17,268

0

17,268

Other financial liabilities

4,375

–369

4,005

–3

4,003

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AMOUNTS THAT ARE NOT SET OFF IN THE BALANCE SHEET

 

€ million

Gross amounts of reco­gnized financial liabi­lities

Gross amounts of reco­gnized financial assets set off in the balance sheet

Net amounts of financial liabi­lities prese­nted in the balance sheet

Financial instru­ments

Collateral pledged

Net amount at Dec. 31, 2013

 

 

 

 

 

 

 

Put options and compensation rights granted to noncontrolling interest shareholders

3,638

3,638

3,638

Derivatives

2,236

2,236

–1,072

1,165

Financial liabilities

121,504

121,504

–2,060

119,444

Trade payables

18,162

–138

18,024

–1

18,024

Other financial liabilities

4,921

–326

4,595

4,595

The “Financial instruments” column shows the amounts that are subject to a master netting arrangement but were not set off because they do not meet the criteria for offsetting in the balance sheet. The ”Collateral received” and “Collateral pledged” columns show the amounts of cash collateral and collateral in the form of financial instruments received and pledged for the total assets and liabilities that do not meet the criteria for offsetting in the balance sheet.

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CHANGES IN CREDIT RISK VALUATION ALLOWANCES ON FINANCIAL ASSETS

€ million

 

Specific valuation allow­ances

 

Portfolio-based valuation allow­ances

 

2013

 

Specific valuation allow­ances

 

Portfolio-based valuation allow­ances

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at Jan. 1

 

2,072

 

1,253

 

3,325

 

1,983

 

1,050

 

3,033

Exchange rate and other changes

 

–75

 

–37

 

–113

 

–20

 

–13

 

–34

Changes in consolidated Group

 

2

 

0

 

2

 

46

 

13

 

59

Additions

 

887

 

393

 

1,280

 

901

 

383

 

1,284

Utilization

 

383

 

 

383

 

399

 

 

399

Reversals

 

308

 

133

 

441

 

416

 

203

 

619

Reclassification

 

43

 

–43

 

0

 

–23

 

23

 

0

Balance at Dec. 31

 

2,237

 

1,433

 

3,670

 

2,072

 

1,253

 

3,325

The valuation allowances mainly relate to the credit risks associated with the financial services business.

The trade receivables and receivables from customer financing include transferred receivables in the total amount of €17 million (previous year: €8 million) and €– million (previous year: €570 million) respectively that were not derecognized in their entirety because the credit risk remains with the Volkswagen Group. The total purchase price received of €8 million (previous year: €8 million) and €– million (previous year: €553 million) respectively is reported in financial liabilities. The fair values of the receivables and liabilities are not materially different to their carrying amounts.