Basis of consolidation In addition to Volkswagen AG, the consolidated financial statements comprise all significant
Basis of consolidation In addition to Volkswagen AG, the consolidated financial statements comprise all significant
companies at which Volkswagen AG is able, directly or indirectly, to govern the financial and operating policies in such a way that it can obtain benefits from the activities of these companies (subsidiaries). The subsidiaries also comprise special purpose entities whose net assets are attributable to the Group under the principle of substance over form. The special purpose entities are used primarily to enter into asset-backed securities transactions to refinance the financial services business. Consolidation of subsidiaries begins at the first date on which control exists, and ends when such control no longer exists.
Subsidiaries whose business is dormant or of low volume and that are insignificant for the fair presentation of the net assets, financial position and results of operations as well as the cash flows of the Volkswagen Group are not consolidated. They are carried in the consolidated financial statements at the lower of cost or fair value since no active market exists for these companies and fair values cannot be reliably ascertained without undue cost or effort. The aggregate equity of these subsidiaries amounts to 0.9% (previous year: 1.2%) of Group equity. The aggregate profit after tax of these companies amounts to 0.4% (previous year: 0.2%) of the profit after tax of the Volkswagen Group.
Significant companies where Volkswagen AG is able, directly or indirectly, to significantly influence financial and operating policy decisions (associates), or that are directly or indirectly jointly controlled (joint ventures), are accounted for using the equity method. Joint ventures also include companies in which the Volkswagen Group holds the majority of voting rights, but whose articles of association or partnership agreements stipulate that important decisions may only be resolved unanimously. Insignificant associates and joint ventures are generally carried at the lower of cost or fair value.
The composition of the Volkswagen Group is shown in the following table:
Volkswagen AG and consolidated subsidiaries
Subsidiaries carried at cost Germany
Associates, joint ventures and other equity investments
Germany
International
The list of all shareholdings that forms part of the annual financial statements of Volkswagen AG can be downloaded from the electronic companies register at www.unternehmensregister.de and from www.volkswagenag.com/ir by clicking on “Further mandatory Publications” under the heading “Mandatory Publications”.
The following consolidated German subsidiaries with the legal form of a corporation or partnership meet the criteria set out in section 264(3) or section 264b of the Handelsgesetzbuch ( HGB – German Commercial Code) due to their inclusion in the consolidated financial statements and have as far as possible exercised the option not to publish annual financial statements:
> Audi Akademie GmbH, Ingolstadt > Audi Berlin GmbH, Berlin > Audi Frankfurt GmbH, Frankfurt am Main > Audi Hamburg GmbH, Hamburg > Audi Hannover GmbH, Hanover > Audi Leipzig GmbH, Leipzig > Audi Stuttgart GmbH, Stuttgart > Audi Vertriebsbetreuungsgesellschaft mbH, Ingolstadt > Automobilmanufaktur Dresden GmbH, Dresden > Autostadt GmbH, Wolfsburg > AutoVision GmbH, Wolfsburg > Bugatti Engineering GmbH, Wolfsburg > Haberl Beteiligungs-GmbH, Munich > MAHAG GmbH, Munich > quattro GmbH, Neckarsulm > Raffay Versicherungsdienst GmbH, Hamburg > VfL Wolfsburg-Fußball GmbH, Wolfsburg > VGRD GmbH, Wolfsburg > Volim Volkswagen Immobilien Vermietgesellschaft für VW-/Audi-Händlerbetriebe mbH,
Braunschweig > Volkswagen Automobile Berlin GmbH, Berlin > Volkswagen Automobile Frankfurt GmbH, Frankfurt am Main > Volkswagen Automobile Hamburg GmbH, Hamburg > Volkswagen Automobile Stuttgart GmbH, Stuttgart
> Volkswagen Financial Services Beteiligungsgesellschaft mbH, Braunschweig > Volkswagen Gebrauchtfahrzeughandels und Service GmbH, Langenhagen > Volkswagen Group Real Estate GmbH & Co. KG, Wolfsburg > Volkswagen Immobilien GmbH, Wolfsburg > Volkswagen Logistics GmbH & Co. OHG , Wolfsburg > Volkswagen Original Teile Logistik GmbH & Co. KG, Baunatal > Volkswagen Osnabrück GmbH, Osnabrück > Volkswagen R GmbH, Wolfsburg > Volkswagen Sachsen GmbH, Zwickau > Volkswagen Versicherungsvermittlung GmbH, Braunschweig > Volkswagen Vertriebsbetreuungsgesellschaft mbH, Chemnitz > Volkswagen Zubehör GmbH, Dreieich > Volkswagen-Versicherungsdienst GmbH, Braunschweig
CONSOLI DATED FI NANC IAL STATEMENTS 261
Income Statement Statement of Comprehensive Income Balance Sheet Statement of Changes in Equity Cash Flow Statement Notes
Responsibility Statement Auditors’ Report
CONSOLI DATED SU BSIDIARIES
The Volkswagen Group acquired a majority stake in MAN SE , Munich, on November 9, 2011 under the terms of a mandatory public offer. The analysis of the assets acquired and liabilities assumed was only completed in the reporting period for reasons of time. Following an adjustment based on better knowledge, the business combination generated goodwill of €759 million (originally €575 million). The updated purchase price allocation resulted in the adjustment of the corresponding prior-year comparative figures. This updating had no effect on the prior-year income statement. The goodwill is not tax-deductible.
The following table shows the allocation of the purchase price to the assets and liabilities:
IFRS carrying
Adjustment of
Fair values at the € million
amounts at the
Purchase price
balance sheet as of
acquisition date
allocation
Dec. 31, 2011
acquisition date
Brand names
1,628 Technology
2,397 Customer and dealer relationships
3,160 Other intangible assets*
428 Property, plant and equipment
1,731 Leasing and rental assets
2,232 Other noncurrent assets
3,930 Trade receivables
2,319 Cash and cash equivalents
607 Other current assets
Total assets
Noncurrent financial liabilities
1,973 Other noncurrent liabilities and provisions
4,887 Current financial liabilities
1,334 Trade payables
2,137 Current provisions
1,954 Other current liabilities
Total liabilities
* Excluding goodwill of Volkswagen AG.
€505 million of the goodwill and €1,158 million of the brand names are allocated to the MAN Commercial Vehicles operating segment, which is part of the Trucks and Buses reporting segment; the remaining goodwill of €254 million and the remaining brand names of €470 million are allocated to the Power Engineering segment.
In fiscal year 2012, Volkswagen acquired further shares in MAN SE for €2,081 million and, as of December 31, 2012, held 75.03% of the voting rights and 73.72% of the share capital of MAN SE . The difference of €–678 million arising from the acquisition of further shares was recognized directly in equity.
The shares of Scania AB held by MAN SE increase the interest in the capital of Scania attrib- utable to Volkswagen AG shareholders to 59.13% (December 31, 2011: 56.94%). The resulting difference of €–73 million was recognized directly in equity.
The share of noncontrolling interests acquired in the equity of MAN and Scania was €1,331 million.
On August 1, 2012, Porsche Automobil Holding SE, Stuttgart (Porsche SE), contributed its holding company operating business to Volkswagen AG by way of singular succession in the course of a capital increase with a mixed noncash contribution.
The business acquired from Porsche SE consists in particular of the 50.1% interest held by Porsche SE in Porsche Holding Stuttgart GmbH, Stuttgart (Porsche Holding Stuttgart) (formerly: Porsche Zweite Zwischenholding GmbH, Stuttgart, as the legal successor to Porsche Zwischen- holding GmbH, Stuttgart), and thus indirectly in Dr. Ing. h.c. F. Porsche AG, Stuttgart (Porsche AG), and of all other subsidiaries of Porsche SE existing at the contribution date (with the exception of the interest in Volkswagen AG), as well as receivables from and liabilities to companies of the Porsche Holding Stuttgart Group.
With unit sales of 117 thousand vehicles, premium sports car manufacturer Porsche AG generated sales revenue of €10,928 million and profit before tax of €2,108 million in fiscal year 2011. The integration of Porsche allows the Volkswagen Group to expand its product portfolio in the premium segment.
Volkswagen AG increased its share capital by €2.56 by issuing one new ordinary bearer share and allowed Porsche SE to subscribe for this new share; the preemptive rights of the other shareholders were disapplied. Volkswagen AG paid €4,495 million to Porsche SE as further consideration. The cash consideration is based on the equity value of €3,883 million for the remaining 50.1% interest in Porsche Holding Stuttgart (and thus indirectly in Porsche AG) held by Porsche SE set out in the Comprehensive Agreement, and also comprises a number of adjust- ment items. Among other things, Porsche SE will be remunerated for dividend payments from its indirect interest in Porsche AG that it would have received as well as for half of the present value of the net synergies realizable as a result of the accelerated integration, which amount to a total of approximately €320 million.
Based on the updated assumptions underlying the valuation at the acquisition date, Volks- wagen AG’s call option on the shares of Porsche Holding Stuttgart agreed in the Comprehensive Agreement with Porsche SE has a positive fair value of €10,199 million (December 31, 2011: €8,409 million) and the corresponding put option has a negative fair value of €2 million (December 31, 2011: €87 million). The fair values of the options are included in the cost of the business combination. The difference attributable to the updated fair values amounting to €1,875 million was recognized in the other financial result.
The shares of Porsche Holding Stuttgart, which were accounted for using the equity method at the acquisition date, were revalued at their fair value of €12,566 million on acquisition of the remaining shares. Measurement of the shares uses the same assumptions that were also used to measure the options on the outstanding shares of Porsche Holding Stuttgart and is based on Porsche Holding Stuttgart’s business plans. The transition from the equity method to consolidation resulted in a noncash book gain of €10,399 million, which was recognized in the share of profits and losses of equity-accounted investments; this includes amounts totaling €–316 million that were previously recognized directly in equity and that were transferred to the income statement.
CONSOLI DATED FI NANC IAL STATEMENTS 263
Income Statement Statement of Comprehensive Income Balance Sheet Statement of Changes in Equity Cash Flow Statement Notes
Responsibility Statement Auditors’ Report
The measurement basis for the goodwill is calculated as follows:
€ million
Purchase price for shares acquired on August 1
Fair value of options on the outstanding shares
Fair value of existing shares
Issued ordinary share of Volkswagen AG
Measurement basis for goodwill 27,258
The costs incurred in connection with the issue of the new ordinary share reduced the capital reserves by €1 million, net of deferred taxes. The other transaction-related costs incurred to date of €3 million were recognized as expenses.
The analysis of the assets acquired and liabilities assumed was not completed by the date of issue of the consolidated financial statements for reasons of time. Preliminary purchase price allocation indicates that the business combination generated goodwill of €18,871 million. The goodwill is not tax-deductible.
The following table shows the preliminary allocation of the purchase price to the assets and liabilities:
IFRS carrying amounts at the
Fair values at the € million
Purchase price
Adjustment in the
acquisition date
allocation
measurement period
acquisition date
Brand names
13,823 Technology
2,203 Customer and dealer relationships
691 Other intangible assets*
82 21 489 Property, plant and equipment
160 Leasing and rental assets
1,425 Other noncurrent assets
1,625 Trade receivables
348 Cash and cash equivalents
1,812 Other current assets
Total assets
9,654 Other noncurrent liabilities and provisions
Noncurrent financial liabilities
4 8,516 Current financial liabilities
4,142 Trade payables
1,112 Current provisions
71 1,308 Other current liabilities
Total liabilities
* Excluding goodwill of Volkswagen AG.
The goodwill and the brand name are allocated to the Porsche operating segment, which is part of the Passenger Cars and Light Commercial Vehicles reporting segment.
The gross carrying amount of the receivables acquired was €9,858 million at the acquisition date, and the net carrying amount (equivalent to the fair value) was €9,775 million. Of this total, gross carrying amounts of €6,449 million (net carrying amounts: €6,449 million) are attributable to acquired loans and gross carrying amounts of €1,202 million (net carrying amounts: €1,127 million) are attributable to acquired finance lease receivables. The depreciable noncurrent assets have remaining useful lives of between 4 months and 50 years.
As of December 31, 2012, the inclusion of the company increased the Group’s sales revenue by €4,534 million and increased its profit after tax, net of write-downs of hidden reserves identified in the course of purchase price allocation, by €292 million. If Porsche had been included as of January 1, 2012, the Group’s sales revenue after consolidation as of December 31, 2012 would have been approximately €6,208 million higher and its profit after tax, net of write-downs of hidden reserves identified in the course of purchase price allocation, would have been approximately €656 million higher.
The contribution of Porsche SE’s holding company operating business increases the consoli- dated Group by 107 consolidated subsidiaries. As of July 19, 2012, the Volkswagen Group acquired 100% of the voting rights of motorcycle manufacturer Ducati Motor Holding S.p.A., Bologna, Italy, against payment of a purchase price of €747 million, via Automobili Lamborghini S.p.A., Sant’ Agata Bolognese, Italy, a subsidiary of AUDI AG . The acquisition of Ducati – a leading international manufacturer of premium motorcycles with significant expertise in high-performance engines and lightweight construction – has seen the Group move into the growth market for high-quality motorcycles. The Ducati Group sold 42,016 motorcycles in calendar year 2011, generating sales revenue of €479 million.
The analysis of the assets acquired and liabilities assumed was not completed by the date of issue of the consolidated financial statements for reasons of time. The provisional goodwill determined in the amount of €290 million contains intangible assets that are not separable and that cannot be attributed to contractual or other rights, such as the expertise of Ducati’s employees. The goodwill is not tax-deductible. The transaction-related costs incurred to date of €1 million were recognized as expenses.
The following table shows the preliminary allocation of the purchase price to the assets and liabilities:
IFRS carrying amounts at the
Purchase price Fair values at the € million
acquisition date
allocation acquisition date
Brand names
193 404 Customer relationships
49 131 180 Other intangible assets
78 17 95 Land and buildings
78 3 81 Other noncurrent assets
25 8 33 Inventories
83 0 83 Cash and cash equivalents
– 150 Other current assets
Total assets
Noncurrent liabilities
108 214 Current liabilities
Total liabilities
CONSOLI DATED FI NANC IAL STATEMENTS 265
Income Statement Statement of Comprehensive Income Balance Sheet Statement of Changes in Equity Cash Flow Statement Notes
Responsibility Statement Auditors’ Report
The gross carrying amount of the receivables acquired was €153 million at the acquisition date, and the net carrying amount (equivalent to the fair value) was €142 million.
As of December 31, 2012, the inclusion of the company increased the Group’s sales revenue by €209 million and reduced its profit, net of write-downs of hidden reserves identified in the course of purchase price allocation, by €27 million. If Ducati had been included in the consoli- dated financial statements as of January 1, 2012, the Group’s sales revenue after consolidation as of December 31, 2012 would have been approximately €422 million higher and its profit after tax, net of write-downs of hidden reserves identified in the course of purchase price allocation, would have been approximately €34 million higher.
In order to strengthen its sales activities, Volkswagen acquired all shares of KPI Polska Sp.z o.o., Poznan ( KPI Polska), effective January 1, 2012. KPI Polska is the exclusive importer and distributor of various Volkswagen Group brands in Poland. At the same time, Volkswagen acquired from the previous owners of KPI Polska the outstanding shares of the former jointly controlled companies Volkswagen Leasing Polska Sp.z o.o., Warsaw, and Volkswagen Bank Polska S.A., Warsaw. The purchase price paid amounted to €254 million in total. The measurement of the existing shares in the financial services companies at a fair value of €66 million resulted in a noncash book gain of €21 million, which was recognized in the share of profits and losses of equity-accounted investments.
In addition, on March 28, 2012, the Volkswagen Group acquired through MAN Truck & Bus AG, Munich, the remaining shares (apart from one share) of MAN TRUCKS India Private Limited, Akurdi/India (formerly: MAN FORCE TRUCKS Private Limited, Akurdi/India), which until then had been a joint venture, against payment of €150 million. The company has been consolidated since that date. MAN TRUCKS India produces CLA series heavy MAN trucks for the Indian market and for export to Asian and African countries. The shares, which were accounted for using the equity method at the acquisition date, were recognized at their acquisition-date fair value of €73 million. This resulted in a noncash book loss of €37 million, which was recognized in the share of profits and losses of equity-accounted investments. The measurement basis for the goodwill from the two transactions is calculated as follows:
€ million
Purchase price for shares acquired
Fair value of existing shares
Measurement basis for goodwill 543
Transaction-related costs of €3.5 million were recognized directly as expenses.
The following main groups of assets and liabilities were acquired and assumed for KPI Polska, the Polish financial services companies and MAN TRUCKS India:
IFRS carrying amounts at the
Purchase price Fair values at the
allocation acquisition date € million
acquisition date
Noncurrent assets
100 427 Cash and cash equivalents
74 – 74 Other current assets
Total assets
Noncurrent liabilities
28 220 Current liabilities
Total liabilities 860
The gross carrying amount of the receivables was €708 million at the acquisition date, and the net carrying amount (equivalent to the fair value) was €668 million. The depreciable noncurrent assets have remaining useful lives of between 24 months and 40 years.
The goodwill from the acquisition of KPI Polska amounts to €58 million and is allocated to the Volkswagen Passenger Cars operating segment, which is part of the Passenger Cars and Light Commercial Vehicles reporting segment. The goodwill of €28 million attributable to the Polish financial services companies is allocated to the Volkswagen Financial Services operating segment, which is part of the Financial Services reporting segment. The provisional goodwill from the acquisition of MAN TRUCKS India amounts to €208 million and is allocated to the MAN Commercial Vehicles operating segment, which is part of the Trucks and Buses reporting segment. The goodwill from the acquisitions is not tax-deductible.
The initial inclusion of the abovementioned companies had no material effect on the Volks- wagen Group’s sales revenue and profit after tax. The abovementioned fair values of the assets and liabilities were determined as far as possible using observable market prices. If market prices could not be determined, recognized valuation techniques were used to measure the assets acquired and liabilities assumed.
In addition, five domestic companies that were not consolidated in the previous year, three newly formed domestic companies, two newly acquired domestic companies, as well as 13 newly acquired foreign companies, 13 newly formed foreign companies and 23 foreign companies that were not consolidated in the previous year were consolidated for the first time. The initial inclusion of these subsidiaries, either individually or collectively, did not have a significant effect on the presentation of the Company’s position. The number of consolidated domestic subsidiaries was also reduced by the merger/liquidation of three companies, while the number of consolidated foreign subsidiaries was reduced by the merger/liquidation of 31 companies.
I NVESTMENTS IN ASSOCIATES
The acquisition of the majority interest in MAN SE in fiscal year 2011 meant that MAN’ s 30% interest in Ferrostaal GmbH (formerly: Ferrostaal AG), Essen, was attributable to Volkswagen. There was already an intention to sell the investment in the near term at the time it was acquired, so the shares were classified as held for sale and not accounted for using the equity method. The investment had already been written down in full as of December 31, 2011. On March 7, 2012, the settlement agreement between MAN SE and the International Petroleum Investment Com- pany (IPIC) , Abu Dhabi, regarding the repurchase of the 70% interest in Ferrostaal held by IPIC was completed (settlement with IPIC ).
This resulted in a cash outflow of €350 million, which is reported as part of the cash flows from operating activities.
CONSOLI DATED FI NANC IAL STATEMENTS 267
Income Statement Statement of Comprehensive Income Balance Sheet Statement of Changes in Equity Cash Flow Statement Notes
Responsibility Statement Auditors’ Report
At the same time, the agreement between MAN and MPC Industries GmbH, Hamburg, regarding the transfer of 100% of the shares of Ferrostaal to MPC and a co-investor was implemented (the MPC sale). The completion of the settlement with IPIC and the sale of MPC did not result in any earnings effects for Volkswagen because the earnings effects attributable to the transaction had already been included in purchase price allocation for the MAN Group as a contingent liability.
The following carrying amounts are attributable to the Volkswagen Group from its proportionate interest in Sinotruk (Hong Kong) Limited, Hong Kong (Sinotruk), and Rheinmetall MAN Military Vehicles GmbH, Munich (RMMV) :
SINOTRUK RMMV
Equity interest ( %)
Share of quoted market price
Sales revenue 859
Profit/loss for the period 8 49 9 1
1 Amounts for Sinotruk refer to the June 30 reporting date and for RMMV to the September 30 reporting date. 2 Amounts for Sinotruk refer to the period from July 1 to June 30 and for RMMV to the period from October 1 to September 30.
I NTERESTS IN JOINT VENTURES
The following carrying amounts are attributable ratably to the Volkswagen Group from its pro- portionate interest in joint ventures:
Shanghai-
FAW -Volkswagen
Equity interest (%)
Noncurrent assets
Current assets
Noncurrent liabilities
Current liabilities
Equity interest (%)
Noncurrent assets
Current assets
Noncurrent liabilities
Current liabilities
* Application of the equity method was terminated on August 1, 2012 when this company was fully consolidated. The disclosures on income and expenses for 2012 relate to the period up to July 31.
The Volkswagen Group holds a 50% indirect interest in the joint venture LeasePlan Corpo- ration N.V., Amsterdam, the Netherlands, via its 50% stake in the joint venture Global Mobility Holding B.V., Amsterdam, the Netherlands. Volkswagen agreed with Fleet Investments B.V., Amsterdam, the Netherlands, an investment company belonging to the von Metzler family, that Fleet Investments would become the new co-investor in Global Mobility Holding in 2010 for an initial period of two years. The agreement was prolonged by a further two years in fiscal year 2011. The previous co-investors were instructed by Volkswagen AG to transfer their shares to Fleet Invest- ments B.V. on February 1, 2010 for the purchase price of €1.4 billion. Volkswagen AG granted the new co-investor a put option on its shares. If this option is exercised, Volkswagen must pay the original purchase price plus accumulated pro rata preferred dividends or the higher fair value. The put option is accounted for at fair value.
In addition, Volkswagen has pledged claims under certificates of deposit with Bankhaus Metzler in the amount of €1.5 billion to secure a loan granted to Fleet Investments B.V. by Bankhaus Metzler. This pledge does not increase the Volkswagen Group’s risk arising from the above- mentioned short position.