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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, 2014

 

Dec. 31, 2013

 

 

 

 

 

Financial assets at fair value through profit or loss

 

820

 

373

Loans and receivables

 

119,130

 

111,010

Available-for-sale financial assets

 

14,544

 

12,435

Financial liabilities at fair value through profit or loss

 

767

 

762

Financial liabilities measured at amortized cost

 

163,032

 

147,346

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. In the reconciliation presented in the following tables, equity instruments recognized at their carrying amount have been allocated to Level 3 of the fair value hierarchy as of fiscal year 2014.

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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

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RECONCILIATION OF BALANCE SHEET ITEMS TO CLASSES OF FINANCIAL INSTRUMENTS AS OF DECEMBER 31, 2014

 

 

MEASURED AT FAIR VALUE

 

MEASURED AT AMORTIZED COST

 

NOT WITHIN SCOPE OF IFRS 7

 

BALANCE SHEET ITEM AT DEC. 31, 2014

€ million

 

Carrying amount

 

Carrying amount

 

Fair value

 

Carrying amount

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent assets

 

 

 

 

 

 

 

 

 

 

Equity-accounted investments

 

 

 

 

9,874

 

9,874

Other equity investments

 

2,922

 

761

 

761

 

 

3,683

Financial services receivables

 

 

57,877

 

60,052

 

 

57,877

Other financial assets

 

2,047

 

4,451

 

4,496

 

 

6,498

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

Trade receivables

 

 

11,472

 

11,472

 

 

11,472

Financial services receivables

 

 

44,398

 

44,398

 

 

44,398

Other financial assets

 

1,551

 

6,141

 

6,141

 

 

7,693

Marketable securities

 

10,861

 

 

 

 

10,861

Cash, cash equivalents and time deposits

 

 

19,123

 

19,123

 

 

19,123

 

 

 

 

 

 

 

 

 

 

 

Noncurrent liabilities

 

 

 

 

 

 

 

 

 

 

Noncurrent financial liabilities

 

 

68,416

 

70,238

 

 

68,416

Other noncurrent financial liabilities

 

2,390

 

1,564

 

1,568

 

 

3,954

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

Put options and compensation rights granted to noncontrolling interest shareholders

 

 

3,703

 

3,822

 

 

3,703

Current financial liabilities

 

 

65,564

 

65,564

 

 

65,564

Trade payables

 

 

19,530

 

19,530

 

 

19,530

Other current financial liabilities

 

2,991

 

4,652

 

4,652

 

 

7,643

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. Financial services receivables are allocated to Level 3 because their fair value was measured using inputs that are not observable in active markets.

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, 2013

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

Noncurrent assets

 

 

 

 

 

 

 

 

Other equity investments

 

2,666

 

2,666

 

 

Other financial assets

 

2,414

 

 

2,400

 

14

Current assets

 

 

 

 

 

 

 

 

Other financial assets

 

1,680

 

 

1,662

 

18

Marketable securities

 

8,492

 

8,410

 

83

 

Noncurrent liabilities

 

 

 

 

 

 

 

 

Other noncurrent financial liabilities

 

1,169

 

 

1,033

 

136

Current liabilities

 

 

 

 

 

 

 

 

Other current financial liabilities

 

1,070

 

 

988

 

82

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€ million

 

Dec. 31, 2014

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

Noncurrent assets

 

 

 

 

 

 

 

 

Other equity investments

 

2,922

 

2,922

 

 

Other financial assets

 

2,047

 

 

2,023

 

24

Current assets

 

 

 

 

 

 

 

 

Other financial assets

 

1,551

 

 

1,543

 

9

Marketable securities

 

10,861

 

10,861

 

 

Noncurrent liabilities

 

 

 

 

 

 

 

 

Other noncurrent financial liabilities

 

2,390

 

 

2,216

 

174

Current liabilities

 

 

 

 

 

 

 

 

Other current financial liabilities

 

2,991

 

 

2,916

 

75

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

€ million

 

Dec. 31, 2013*

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

*

Prior-year figures adjusted.

Fair value of financial assets measured at amortized cost

 

 

 

 

 

 

 

 

Other equity investments

 

1,274

 

 

186

 

1,088

Financial services receivables

 

91,586

 

 

 

91,586

Trade receivables

 

11,133

 

 

10,999

 

134

Other financial assets

 

9,504

 

166

 

4,960

 

4,378

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

 

17,310

 

97,186

 

 

 

 

 

 

 

 

 

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

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€ million

 

Dec. 31, 2014

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

Fair value of financial assets measured at amortized cost

 

 

 

 

 

 

 

 

Other equity investments

 

761

 

 

 

761

Financial services receivables

 

104,450

 

 

 

104,450

Trade receivables

 

11,472

 

 

11,290

 

182

Other financial assets

 

10,637

 

669

 

5,326

 

4,642

Cash, cash equivalents and time deposits

 

19,123

 

18,653

 

471

 

Fair value of financial assets measured at amortized cost

 

146,443

 

19,321

 

17,086

 

110,036

 

 

 

 

 

 

 

 

 

Fair value of financial liabilities measured at amortized cost

 

 

 

 

 

 

 

 

Put options and compensation rights granted to noncontrolling interest shareholders

 

3,822

 

 

 

3,822

Trade payables

 

19,530

 

 

19,530

 

Financial liabilities

 

135,802

 

22,334

 

113,406

 

62

Other financial liabilities

 

6,220

 

270

 

5,882

 

69

Fair value of financial liabilities measured at amortized cost

 

165,374

 

22,604

 

138,817

 

3,954

The allocation of fair values to the three levels in the fair value hierarchy is based on the availability of observable market prices. Level 1 is used to report the fair value of financial instruments for which a price is available in an active market. Examples include marketable securities and other equity investments measured at fair value. Fair values in Level 2, for example of derivatives, are measured on the basis of observable market inputs using market-based valuation techniques. In particular, the inputs used include exchange rates, yield curves and commodity prices that are observable in the relevant markets and obtained through pricing services. Level 3 fair values are calculated using valuation techniques that incorporate inputs that are not 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. This is done on the basis of observable inputs obtained for the different commodities through pricing services. Options on equity instruments and residual value protection models are also reported in Level 3. Equity instruments are measured primarily using the relevant business plans and entity-specific discount rates. The significant inputs used to measure fair value for the residual value protection models include forecasts and estimates of used vehicle residual values for the appropriate models.

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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, 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

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€ million

 

Financial assets measured at fair value

 

Financial liabilities measured at fair value

 

 

 

 

 

Balance at Jan. 1, 2014

 

32

 

218

Foreign exchange differences

 

15

 

0

Total comprehensive income

 

17

 

91

recognized in profit or loss

 

7

 

87

recognized in other comprehensive income

 

10

 

5

Additions (purchases)

 

 

Sales and settlements

 

−11

 

−47

Transfers into Level 2

 

−21

 

−13

Balance at Dec. 31, 2014

 

32

 

249

 

 

 

 

 

Total gains or losses recognized in profit or loss

 

7

 

−87

Net other operating expense/income

 

 

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

 

 

Financial result

 

7

 

−87

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

 

−17

 

−78

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 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, 2014, profit would have been €20 million (previous year: €6 million) higher (lower) and equity would have been €4 million (previous year: €9 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 €1 million (previous year: €12 million) higher. If the assumed enterprise values had been 10% lower, profit would have been €2 million (previous year: €21 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, 2014, profit after tax would have been €194 million higher. If the prices for the used cars covered by the residual value protection model had been 10% lower as of December 31, 2014, profit after tax would have been €194 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, 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 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, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives

 

3,598

 

 

3,598

 

−1,938

 

−87

 

1,572

Financial services receivables

 

102,574

 

−299

 

102,275

 

 

−31

 

102,244

Trade receivables

 

11,576

 

−104

 

11,472

 

0

 

−305

 

11,166

Marketable securities

 

10,861

 

 

10,861

 

 

 

10,861

Cash, cash equivalents and time deposits

 

19,123

 

 

19,123

 

 

 

19,123

Other financial assets

 

14,282

 

−6

 

14,276

 

0

 

 

14,276

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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

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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, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Put options and compensation rights granted to noncontrolling interest shareholders

 

3,703

 

 

3,703

 

 

 

3,703

Derivatives

 

5,381

 

 

5,381

 

−1,907

 

−51

 

3,422

Financial liabilities

 

133,980

 

 

133,980

 

 

−2,081

 

131,898

Trade payables

 

19,634

 

−104

 

19,530

 

0

 

 

19,529

Other financial liabilities

 

6,522

 

−306

 

6,216

 

 

 

6,216

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

 

2014

 

Specific valuation allowances

 

Portfolio-based valuation allowances

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at Jan. 1

 

2,237

 

1,433

 

3,670

 

2,072

 

1,253

 

3,325

Exchange rate and other changes

 

−8

 

20

 

12

 

−75

 

−37

 

−113

Changes in consolidated Group

 

23

 

24

 

48

 

2

 

0

 

2

Additions

 

703

 

371

 

1,074

 

887

 

393

 

1,280

Utilization

 

396

 

 

396

 

383

 

 

383

Reversals

 

300

 

175

 

475

 

308

 

133

 

441

Reclassification

 

8

 

−8

 

0

 

43

 

−43

 

0

Balance at Dec. 31

 

2,269

 

1,665

 

3,933

 

2,237

 

1,433

 

3,670

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

FACTORING AND ASSET-BACKED SECURITIES TRANSACTIONS

The trade receivables include transferred receivables in the total amount of €4 million (previous year: €17 million) that were not derecognized in their entirety because the credit risk remains with the Volkswagen Group. The total purchase price received of €1 million (previous year: €8 million) is reported in financial liabilities. The fair values of the receivables and liabilities are not materially different to their carrying amounts.

Asset-backed securities transactions amounting to €19,301million (previous year: €15,575 million) entered into to refinance the financial services business are included in bonds, commercial paper and notes, and liabilities from loans. The corresponding carrying amount of the receivables from the customer and dealer financing and the finance lease business amounted to €21,485 million (previous year: €18,897 million). Collateral furnished in asset-backed securities transactions amounted to €28,192 million in total (previous year: €24,820 million). These asset-backed securities transactions did not result in the receivables from financial services business being derecognized, as the Group retains nonpayment and late payment risks. The difference between the assigned receivables and the related liabilities is the result of different terms and conditions and the share of the securitized paper and notes held by the Volkswagen Group itself.

Most of the public and private asset-backed securities transactions of the Volkswagen Financial Services AG Group can be repaid in advance (clean-up call) if less than 9% or 10%, as appropriate, of the original transaction volume is outstanding. The asset-backed securities transactions of Volkswagen Financial Services (UK) will have been largely repaid by the time all of the liabilities have been redeemed. The assigned receivables cannot be assigned again or pledged elsewhere as collateral. The claims of the holders of commercial paper and notes are limited to the assigned receivables and the receipts from those receivables are earmarked for the repayment of the corresponding liability.

As of December 31, 2014, the fair value of the assigned receivables still recognized in the balance sheet was €22,102 million (previous year: €19,664 million). The fair value of the related liabilities was €19,480 million at that reporting date (previous year: €15,879 million).