34 IFRS 16 (Leases)

1. LESSEE ACCOUNTING

The Volkswagen Group is a lessee, mainly as a result of leasing office equipment, real estate and other means of production. The leases are negotiated individually and include a large number of contract terms and conditions. The following amounts for right-of-use assets resulting from leases are included in the balance sheet items:

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PRESENTATION OF AND CHANGES IN RIGHT-OF-USE ASSETS FROM LEASES FOR THE PERIOD
FROM JANUARY 1 TO DECEMBER 31, 2019

€ million

 

Right of use on land, land rights and buildings incl. buildings on third party land

 

Right of use on technical equipment and machinery

 

Right of use on other equipment, operational and office equipment

 

Total

 

 

 

 

 

 

 

 

 

Cost Balance at Jan. 1, 2019

 

5,139

 

77

 

294

 

5,510

Foreign exchange differences

 

82

 

0

 

1

 

83

Changes in consolidated Group

 

13

 

 

0

 

13

Additions

 

1,201

 

5

 

459

 

1,666

Transfers

 

−8

 

−39

 

−5

 

−52

Classified as held for sale

 

9

 

 

1

 

10

Disposals

 

166

 

0

 

11

 

177

Balance at Dec. 31, 2019

 

6,253

 

44

 

738

 

7,034

Depreciation and impairment Balance at Jan. 1, 2019

 

63

 

17

 

4

 

84

Foreign exchange differences

 

3

 

0

 

0

 

4

Changes in consolidated Group

 

1

 

 

 

1

Additions to cumulative depreciation

 

810

 

6

 

126

 

942

Additions to cumulative impairment losses

 

 

 

 

Transfers

 

−8

 

 

0

 

−8

Classified as held for sale

 

1

 

 

0

 

1

Disposals

 

19

 

0

 

4

 

23

Reversal of impairment losses

 

 

 

0

 

0

Balance at Dec. 31, 2019

 

848

 

23

 

126

 

998

Carrying amount at Dec. 31, 2019

 

5,404

 

21

 

611

 

6,036

Subleases of right-of-use assets generated income of €20 million in the fiscal year.

The measurement of right-of-use assets from leases and the associated lease liabilities is based on a best estimate regarding the exercise of extension and termination options. If there are material changes in circumstances or in the contract, this estimate is updated.

The tables below show how the lease liabilities are assigned in the balance sheet and give an overview of their contractual maturities:

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ASSIGNMENT OF LEASE LIABILITIES TO THE RESPECTIVE BALANCE SHEET ITEMS

€ million

 

Dec. 31, 2019

 

 

 

Financial liabilities – Noncurrent

 

5,208

Financial liabilities – Current

 

1,002

Lease liabilities – Total

 

6,210

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MATURITY ANALYSIS OF LEASE LIABILITIES

 

 

REMAINING CONTRACTUAL MATURITIES

 

 

€ million

 

under one year

 

within one to five years

 

over five years

 

Total

 

 

 

 

 

 

 

 

 

Lease liabilities at Dec. 31, 2019

 

1,002

 

2,613

 

2,595

 

6,210

Interest expenses of €230 million were incurred for lease liabilities in the fiscal year.

No right-of-use assets are recognized for low-value or short-term leases. Expenses for leasing low-value assets totaled €270 million in the fiscal year. This figure does not include any expenses for short-term leases, which totaled €333 million in the fiscal year. Variable lease expenses not included in the measurement of lease liabilities accounted for €1 million in the fiscal year.

Leases gave rise to cash outflows totaling €1,797 million in the fiscal year.

The table below shows a summary of potential future cash outflows, that have not been included in the measurement of the lease liabilities:

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€ million

 

2019

 

 

 

Future cash outflows to which the lessee is potentially exposed

 

 

Variable lease payments

 

1

Residual value guarantees

 

0

Extension options

 

3,575

Termination options

 

3

Obligations under leases not yet commenced

 

359

 

 

3,938

2. LESSOR ACCOUNTING

The Volkswagen Group is a lessor in both the finance lease business and the operating lease business. The subject of these transactions is primarily motor vehicles and, to a small extent, land and buildings and items of equipment for dealerships.

The Volkswagen Group fully accounts for the default risk on lease receivables by recognizing loss allowances, which are recognized in accordance with the requirements of IFRS 9. As lessor, the Volkswagen Group covers risks arising from the assets underlying the leases by, among other measures, taking account of residual value guarantees received for parts of the lease portfolio and by taking account of forward-looking residual values forecast on the basis of internal and external information as part of residual value management. The forecast residual values are regularly reviewed.

2.1 OPERATING LEASES

Assets leased under long-term operating leases amounted to €49,476 million at the end of the fiscal year. While €538 million is attributable to investment property, assets separately reported as lease assets in the balance sheet amount to €48,938 million. They relate primarily to vehicles in an amount of €48,853 million as well as land, land rights and buildings, including buildings on third-party land, in an amount of €78 million. The remaining assets relate to technical equipment and machinery as well as other equipment, operating and office equipment. More information on changes in value of investment property and lease assets can be found in the section entitled “Lease assets and investment property”.

The following cash inflows from expected outstanding, non-discounted operating lease payments are expected over the coming years:

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€ million

 

2020

 

2021

 

2022

 

2023

 

2024

 

From 2025

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease payments

 

9,370

 

6,436

 

3,677

 

997

 

338

 

344

 

21,164

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BREAKDOWN OF INCOME FROM OPERATING LEASES

€ million

 

2019

 

 

 

Lease income

 

12,014

Income from variable lease payments

 

13

Total

 

12,027

2.2 FINANCE LEASES

Interest income from the net investment in the leases amounted to €2.4 billion in the fiscal year. Furthermore, a selling profit from the finance leases in the amount of €1.2 billion was recognized.

The following table shows the reconciliation of outstanding lease payments under finance leases to the net investment:

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€ million

 

Dec. 31, 2019

 

 

 

Non-discounted lease payments

 

54,302

Non-guaranteed residual value

 

4,112

Unearned interest income

 

−3,789

Loss allowance on lease receivables

 

−971

Net investment

 

53,652

The following cash inflows from expected outstanding, non-discounted finance lease payments are expected over the coming years:

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€ million

 

2020

 

2021

 

2022

 

2023

 

2024

 

From 2025

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease payments

 

19,428

 

14,590

 

12,179

 

6,883

 

847

 

373

 

54,302