29 | Provisions for pensions and other post-employment benefits Provisions for pensions are recognized for commitments in the form of retirement, invalidity
29 | Provisions for pensions and other post-employment benefits Provisions for pensions are recognized for commitments in the form of retirement, invalidity
and dependents’ benefits payable under pension plans. The benefits provided by the Group vary according to the legal, tax and economic circumstances of the country concerned, and usually depend on the length of service and remuneration of the employees.
Group companies provide occupational pensions under both defined contribution and defined benefit plans. In the case of defined contribution plans, the Company makes contributions to state or private pension schemes based on legal or contractual requirements, or on a voluntary basis. Once the contributions have been paid, there are no further obligations for the Company. Current contributions are recognized as pension expenses of the period concerned. In 2012, they amounted to a total of €1,580 million (previous year: €1,237 million) in the Volkswagen Group. Of this figure, contributions to the compulsory state pension system in Germany amounted to €1,219 million (previous year: €925 million).
Most pension plans are defined benefit plans, with a distinction made between pensions financed by provisions and externally funded plans. The pension provisions for defined benefits are measured using the internationally accepted projected unit credit method in accordance with IAS
19, under which the future obligations are measured on the basis of the ratable benefit entitlements earned as of the balance sheet date. Measurement reflects assumptions as to trends in the relevant variables affecting the level of benefits. All defined benefit plans require actuarial calculations. Actuarial gains or losses arise from changes in the number of beneficiaries and differences between actual trends (for example, in salary and pension increases or changes in interest rates) and the prior-year assumptions on which calculations were based. Actuarial gains and losses are recognized in other comprehensive income.
Owing to their benefit character, the obligations of the US Group companies in respect of post-employment medical care in particular are also carried under provisions for pensions and other post-employment benefits. These post-employment benefit provisions take into account the expected long-term rise in the cost of healthcare. A one percentage point increase or decrease in the assumed healthcare cost trends would only marginally affect the amount of the obligations. €18 million (previous year: €16 million) was recognized in fiscal year 2012 as an expense for health care costs. The related carrying amount as of December 31, 2012 was €226 million (previous year: €196 million).
Since 1996, the occupational pension arrangements of the Volkswagen Group in Germany have been based on a specially developed expense-related pension model that is classified as a defined benefit plan under IAS
19. With effect from January 1, 2001, this model was developed into a pension fund, with the annual remuneration-linked contributions being invested in funds by Volkswagen Pension Trust e.V. as the trustee. By investing in funds, this model offers an opportunity for increasing benefit entitlements, while at the same time safeguarding them. For this reason, almost all Group companies in Germany have now joined the fund. Since the fund investments held by the trust meet the criteria in IAS
19 for classification as plan assets, they are deducted from the obligation. Where the foreign Group companies provide collateral for obligations, this mainly takes the form of shares, fixed-income securities and real estate.
CONSOLI DATED FI NANC IAL STATEMENTS 313
Income Statement Statement of Comprehensive Income Balance Sheet Statement of Changes in Equity Cash Flow Statement Notes
Responsibility Statement Auditors’ Report
The following amounts were recognized in the balance sheet for defined benefit plans:
3,240 Fair value of plan assets
Present value of funded obligations
3,153 Funded status (net)
87 Present value of unfunded obligations
12,743 Unrecognized past service cost
29 33 35 36 22 Amount not recognized as an asset because of the limit in IAS 19
Net liability recognized in the balance sheet
12,955 of which other assets
of which provisions for pensions
The present value of the obligations is calculated as follows:
Present value of obligations at January 1
Current service cost
Interest cost
Actuarial gains/losses
Employee contributions to plan assets
Pension payments from company assets
Pension payments from plan assets
Past service cost
Gains from plan curtailments and settlements
Changes in consolidated Group
Other changes
Foreign exchange differences from foreign plans
Present value of obligations at December 31
Changes in the composition of the plan assets are shown in the following table:
Fair value of plan assets at January 1
Expected return on plan assets
Actuarial gains/losses
Employer contributions to plan assets
Employee contributions to plan assets
Pension payments from plan assets
Changes in consolidated Group
Other changes
Foreign exchange differences from foreign plans
Fair value of plan assets at December 31
Investment of the plan assets to cover future pension obligations resulted in income in the amount of €450 million (previous year: €88 million).
Plan assets include €20 million (previous year: €17 million) invested in Volkswagen Group assets and €7 million (previous year: €11 million) in Volkswagen Group debt instruments. The rate for the expected long-term return on plan assets is based on the long-term returns actually generated for the portfolio, historical overall market returns and a forecast of expected returns on the securities classes held in the portfolio. The forecasts are based on detailed analyses by actuaries and experts in the investment industry. As the remaining period of service is used as the investment horizon, no major changes were made to assumptions regarding the expected return.
Employer contributions to plan assets in the next fiscal year are expected to amount to €485 million (previous year: €426 million). Plan assets consist of the following components:
2011 Equities
25.3 24.9 Fixed-income securities
56.1 58.6 Cash
6.7 2.6 Real estate
The following amounts were recognized in the income statement:
Current service cost
391 Interest cost
994 Expected return on plan assets
272 Past service cost
–10 Gains from plan curtailments and settlements
Net income and expenses recognized in profit or loss
The above amounts are generally included in the personnel costs of the functions in the income statement. Interest cost on pension provisions and the expected return on plan assets are presented in finance costs.
€6,900 million (previous year: €2,965 million) of actuarial gains and losses, including non- controlling interests, recognized in the balance sheet was debited to equity. The experience adjustments, meaning differences between changes in assets and obligations expected on the basis of actuarial assumptions and actual changes in those assets and obligations, are shown in the following table:
2009 2008 € million Differences between expected and actual developments:
as % of present value of the obligation
0.39 1.16 –1.04 as % of fair value of plan assets
CONSOLI DATED FI NANC IAL STATEMENTS 315
Income Statement Statement of Comprehensive Income Balance Sheet Statement of Changes in Equity Cash Flow Statement Notes
Responsibility Statement Auditors’ Report
Calculation of the pension provisions was based on the following assumptions:
Discount rate at December 31
Expected return on plan assets
Salary trend
Pension trend
Employee turnover rate
Annual increase in healthcare costs
30 | Noncurrent and current other provisions
Obligations arising from
Balance at Jan. 1, 2011
Foreign exchange differences
Changes in consolidated Group
Additions/New provisions
Interest cost
Balance at Dec. 31, 2011
of which current
of which noncurrent
Balance at Jan. 1, 2012
Foreign exchange differences
Changes in consolidated Group
Additions/New provisions
Interest cost
Balance at Dec. 31, 2012
of which current
of which noncurrent
* Prior-period figures adjusted because of the updated purchase price allocation for MAN.
The obligations arising from sales contain provisions covering all risks relating to the sale of vehicles, components and genuine parts through to the disposal of end-of-life vehicles. They primarily comprise warranty claims, calculated on the basis of losses to date and estimated future losses. They also include provisions for discounts, bonuses and similar allowances which are incurred after the balance sheet date, but for which there is a legal or constructive obligation attributable to sales revenue before the balance sheet date.
Provisions for employee expenses are recognized for long-service awards, time credits, the part-time scheme for employees near to retirement, severance payments and similar obligations, among other things.
Miscellaneous provisions relate to a wide range of identifiable specific risks and uncertain obligations, which are measured in the amount of the expected settlement value. Miscellaneous provisions include provisions amounting to €293 million relating to the insurance business (previous year: €242 million).
31 | Trade payables
€ million
Dec. 31, 2012 Dec. 31, 2011
Trade payables to
third parties 16,978 16,100 affiliated companies
80 129 joint ventures
136 83 associates
68 11 other investees and investors
Additional Balance Sheet Disclosures in Accordance with IFRS 7 (Financial Instruments)
CARRYING AMOUNT OF FINANCIAL INSTRUMENTS BY MEASUREMENT CATEGORY UN DER IAS 39
€ million Dec. 31, 2012 Dec. 31, 2011
Financial assets at fair value through profit or loss 556 9,096 Loans and receivables
102,451 92,163 Available-for-sale financial assets
11,306 9,197 Financial liabilities at fair value through profit or loss
607 1,026 Financial liabilities measured at amortized cost*
138,506 112,975 * Prior-period figures adjusted because of the updated purchase price allocation for MAN.
RECONCI LIATION OF BALANCE SHEET ITEMS TO CLASSES OF FI NANCIAL I NSTRUMENTS
The following table shows the reconciliation of the balance sheet items to the relevant classes of financial instruments, broken down by 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 deemed to be their carrying amount.
CONSOLI DATED FI NANC IAL STATEMENTS 317
Income Statement Statement of Comprehensive Income Balance Sheet Statement of Changes in Equity Cash Flow Statement Notes
Responsibility Statement Auditors’ Report
RECONCI LIATION OF BALANCE SHEET ITEMS TO CLASSES OF FI NANCIAL INSTRUMENTS AS OF DECEMBER 31, 2011
BALANCE
MEASURED
NOT WITHIN
SHEET ITEM
AT FA I R
M E A S U R E D AT A M O R T I Z E D
SCOPE OF
Fair value
amount
Noncurrent assets
Equity-accounted investments
Other equity investments
Financial services receivables
Other financial assets
Current assets
Trade receivables
Financial services receivables
Other financial assets
Marketable securities
Cash, cash equivalents and time deposits
Noncurrent liabilities
Noncurrent financial liabilities*
Other noncurrent financial liabilities
Current liabilities
Current financial liabilities
Trade payables
Other current financial liabilities
* Prior-period figures adjusted because of the updated purchase price allocation for MAN.
RECONCI LIATION OF BALANCE SHEET ITEMS TO CLASSES OF FI NANCIAL INSTRUMENTS AS OF DECEMBER 31, 2012
BALANCE
MEASURED
NOT WITHIN SHEET ITEM
AT FA I R
M E A S U R E D AT A M O R T I Z E D
SCOPE OF AT D E C . 3 1 ,
Carrying € million
Fair value
amount
Noncurrent assets
Equity-accounted investments
7,309 7,309 Other equity investments
– 3,870 Financial services receivables
– 49,785 Other financial assets
Current assets
Trade receivables
– 10,099 Financial services receivables
– 36,911 Other financial assets
– 5,872 Marketable securities
– 7,433 Cash, cash equivalents and time deposits
Noncurrent liabilities
– 63,603 Other noncurrent financial liabilities
Noncurrent financial liabilities
Current liabilities
– 54,060 Trade payables
Current financial liabilities
– 17,268 Other current financial liabilities
CONSOLI DATED FI NANC IAL STATEMENTS 319
Income Statement Statement of Comprehensive Income Balance Sheet Statement of Changes in Equity Cash Flow Statement Notes
Responsibility Statement Auditors’ Report
BALANCE SHEET ITEMS MEASURED AT FAI R VALUE
Financial assets at fair value through profit or loss
Available-for-sale financial assets
Other equity investments
Marketable securities
Financial assets measured at fair value
Financial liabilities at fair value through profit or loss
Financial liabilities measured at fair value
Financial assets at fair value through profit or loss
Available-for-sale financial assets
Other equity investments
Marketable securities
Financial assets measured at fair value
Financial liabilities at fair value through profit or loss
Financial liabilities measured at fair value
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. This mainly relates to the options on the outstanding shares of Porsche Holding Stuttgart until July 31, 2012.
CHANGES I N BALANCE SHEET ITEMS MEASURED AT FAI R VALUE BASED ON LEVEL 3
Financial assets Financial liabilities € million
measured at fair value
measured at fair value
Balance at Jan. 1, 2011
Foreign exchange differences 0 0 Total comprehensive income
–298 recognized in profit or loss
–216 recognized in other comprehensive income
23 –81 Additions (purchases)
– Sales and settlements
83 Transfers into Level 2
Balance at Dec. 31, 2011
Total gains or losses recognized in profit or loss
Net other operating expense/income 90 –116 of which attributable to assets/liabilities held at the reporting date
90 –116 Financial result
–100 of which attributable to assets/liabilities held at the reporting date
CONSOLI DATED FI NANC IAL STATEMENTS 321
Income Statement Statement of Comprehensive Income Balance Sheet Statement of Changes in Equity Cash Flow Statement Notes
Responsibility Statement Auditors’ Report
Financial assets
Financial liabilities
€ million
measured at fair value
measured at fair value
Balance at Jan. 1, 2012
Foreign exchange differences
Total comprehensive income
recognized in profit or loss
recognized in other comprehensive income
Additions (purchases)
Sales and settlements
Transfers into Level 2
Balance at Dec. 31, 2012
Total gains or losses recognized in profit or loss
Net other operating expense/income
of which attributable to assets/liabilities held at the reporting date
Financial result
of which attributable to assets/liabilities held at the reporting date
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.
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, 2012, profit would have been €4 million (previous year: €34 million) higher (lower) and equity would have been €18 million (previous year: €38 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 €14 million (previous year: €1,322 million) higher. If the assumed enterprise values had been 10% lower, profit would have been €25 million (previous year: €1,324 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, 2012, profit after tax would have been €162 million higher. If the prices for the used cars covered by the residual value protection model had been 10% lower as of December 31, 2012, profit after tax would have been €162 million lower.
CHANGES I N CREDIT RISK VALUATION ALLOWANCES ON FINANCIAL ASSETS
valuation € million
Balance at Jan. 1
Exchange rate and other changes
–6 –31 Changes in consolidated
Group 46 13 59 38 19 57 Additions
Balance at Dec. 31
The valuation allowances mainly relate to the credit risks associated with the financial services business.
The receivables from customer financing and trade receivables include transferred receivables in the total amount of €570 million and €8 million respectively that were not derecognized in their entirety because the credit risk remains with the Volkswagen Group. The total purchase price received of €553 million and €8 million, respectively, is reported in financial liabilities. The fair values of the receivables and liabilities are not materially different to their carrying amounts.
CONSOLI DATED FI NANC IAL STATEMENTS 323
Income Statement Statement of Comprehensive Income Balance Sheet Statement of Changes in Equity Cash Flow Statement Notes
Responsibility Statement Auditors’ Report
Other Disclosures