IFRS 12 paras 21, B12-B16, disclosures for material and immaterial associates

Volkswagen AG – Annual report – 31 December 2018

Industry: automotive

INVESTMENTS IN ASSOCIATES
From a Group perspective, the associates Sinotruk (Hong Kong) Ltd., Hongkong, China (Sinotruk), Bertrandt AG, Ehningen (Bertrandt), There Holding B.V., Rijswijk, the Netherlands (There Holding), and Navistar International Corporation, Lisle, USA (Navistar), were material at the reporting date.

Sinotruk
Sinotruk is one of the largest truck manufacturers in the Chinese market. There is an agreement in place between Group companies and Sinotruk regarding a long-term strategic partnership, under which the Group participates in the local market. In addition to the partnership with Sinotruk in the volume segment, exports of MAN vehicles to China are also helping to expand access to the small, but fast-growing premium truck market. Sinotruk’s principal place of business is in Hongkong, China.

As of December 31, 2018, the quoted market price of the shares in Sinotruk amounted to €908 million (previous year: €648 million).

Bertrandt
Bertrandt is an engineering partner to companies in the automotive and aviation industry. Its portfolio of services ranges from developing individual components through complex modules to end-to-end solutions. Bertrandt’s principal place of business is in Ehningen.

As of December 31, 2018, the quoted market price of the shares in Bertrandt amounted to €201 million (previous year: €299 million).

There Holding
The Audi Subgroup, the BMW Group and Daimler AG each held a 33.3 % interest in There Holding B.V., Rijswijk, the Netherlands, which was established in 2015. In December 2016, There Holding B.V. signed a contract with Intel Holdings B.V., Schiphol-Rijk, the Netherlands, for the sale of 15 % of the shares in HERE International B.V., Rijswijk, the Netherlands. The transaction with Intel Holdings B.V. was completed on January 31, 2017. This resulted in a loss of control within the meaning of IFRS 10 at the There Holding B.V. level. The deconsolidation gave rise to a proportionate effect for the Volkswagen Group of €183 million, which was shown in the share of profits or losses of equity-accounted investments in the previous year. Since a significant influence continues to exist, HERE International B.V. is included in the financial statement of There Holding B.V. as an associated company using the equity method. There was no change in the Volkswagen Group’s participating interest in There Holding B.V. as a result of the sale.

In December 2017, agreements for the sale of shares in There Holding B.V. were signed with Robert Bosch Investment Nederland B.V., Boxtel, the Netherlands and Continental Automotive Holding Netherlands B.V., Maastricht, the Netherlands. In this process, Robert Bosch Investment Nederland B.V. and Continental Automotive Holding Netherlands B.V. acquired an interest of 5.9 % each in There Holding B.V. The transactions were completed on February 28, 2018. The Audi Subgroup, the BMW Group and Daimler AG sold the equivalent number of shares. As a result, the interest held by the Volkswagen Group declined to 29.4 % as of this date. There was no material effect on financial position or financial performance.

A capital reduction was carried out at There Holding B.V. in February 2018. The share attributable to the Volkswagen Group amounted to €96 million. In addition, in June 2018 and November 2018, There Holding B.V. implemented capital increases in which the Volkswagen Group participated. As a result, the shares accounted for using the equity method increased by €62 million and the participating interest was 29.6 % as of December 31, 2018.

Navistar
Within the framework of a capital increase, TRATON SE, a wholly owned subsidiary of Volkswagen AG, acquired 16.6 % of the shares in Navistar, paying USD 15.76 per share in 2017. The purchase price came to €0.3 billion. Due to Volkswagen’s representation on the Board of Directors of Navistar and the agreed cooperation, the investment in Navistar is reported as an equity-accounted investment in the consolidated financial statements. As of December 31, 2018, an interest of 16.8 % was held in Navistar, and the quoted market price of the shares in Navistar amounted to €377 million (previous year: €595 million).

SUMMARIZED FINANCIAL INFORMATION ON MATERIAL ASSOCIATES ON A 100 % BASIS

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1 Balance sheet amounts refer to the June 30 reporting date and income statement amounts refer to the period from July 1 to June 30.
2 Balance sheet amounts refer to the September 30 reporting date and income statement amounts refer to the period from October 1 to September 30.
3 Balance sheet amounts refer to the October 31, 2018 reporting date. The income statement amounts for fiscal year 2018 refer to the period from November 1, 2017 to October 31, 2018, while those for fiscal year 2017 refer to the period from March 1, 2017 to October 31, 2017.
4 Proportionate dividends are shown net of withholding tax.

RECONCILIATION OF THE FINANCIAL INFORMATION TO THE CARRYING AMOUNT OF THE EQUITY-ACCOUNTED INVESTMENTS
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1 Reconciliation presented for Navistar in 2017 as of March 1, 2017, the date of the first time inclusion of Navistar.
2 Value in the opening balance of There Holding adjusted due to IFRS 15.
3 Dividends are shown before withholding tax.

SUMMARIZED FINANCIAL INFORMATION ON INDIVIDUALLY IMMATERIAL ASSOCIATES ON THE BASIS OF THE VOLKSWAGEN GROUP’S PROPORTIONATE INTEREST

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There were no unrecognized losses relating to investments in associates. Furthermore, there were also no contingent liabilities or financial guarantees relating to associates.