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Annual Report

32.2. Credit and default risk

The credit and default risk arising from financial assets involves the risk of default by counterparties, and therefore comprises at a maximum the amount of the claims under carrying amounts receivable from them and the irrevocable credit commitments. The risk arising from non-derivative financial instruments is accounted for by recognizing bad debt losses. Cash and capital investments and derivatives are only entered into with prime-rated national and international counterparties. Risk is additionally limited by a limit system based primarily on credit assessments by the international rating agencies and on the equity base of the counterparties concerned.

There were no material concentrations of risk in the past fiscal year due to the global allocation of the Group’s business activities and the resulting diversification.

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CREDIT AND DEFAULT RISK RELATING TO FINANCIAL ASSETS BY GROSS CARRYING AMOUNT

 

 

 

 

€ million

 

Neither past due nor impaired

 

Past due and not impaired

 

Impaired

 

Dec. 31, 2010

 

Neither past due nor impaired

 

Past due and not impaired

 

Impaired

 

Dec. 31, 2009

Measured at amortized cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial services receivables

 

63,400

 

1,750

 

2,922

 

68,072

 

56,223

 

3,760

 

2,488

 

62,471

Trade receivables

 

5,441

 

1,312

 

317

 

7,070

 

4,466

 

1,104

 

321

 

5,891

Other receivables

 

5,250

 

51

 

370

 

5,671

 

3,249

 

101

 

326

 

3,677

 

 

74,091

 

3,113

 

3,610

 

80,813

 

63,938

 

4,966

 

3,135

 

72,039

There are no past due financial instruments measured at fair value in the Volkswagen Group. In fiscal year 2010, no marketable securities measured at fair value were individually impaired. In the previous year, marketable securities measured at fair value with a cost of €20 million were individually impaired.

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CREDIT RATING OF THE GROSS CARRYING AMOUNTS OF FINANCIAL ASSETS THAT ARE NEITHER PAST DUE NOR IMPAIRED

 

 

€ million

 

Risk class 1

 

Risk class 2

 

Dec. 31, 2010

 

Risk class 1

 

Risk class 2

 

Dec. 31, 2009

Measured at amortized cost

 

 

 

 

 

 

 

 

 

 

 

 

Financial services receivables

 

55,246

 

8,153

 

63,400

 

48,221

 

8,002

 

56,223

Trade receivables

 

5,441

 

0

 

5,441

 

4,465

 

0

 

4,466

Other receivables

 

5,238

 

11

 

5,250

 

3,240

 

10

 

3,249

Measured at fair value

 

9,689

 

 

9,689

 

6,289

 

 

6,289

 

 

75,614

 

8,165

 

83,779

 

62,214

 

8,012

 

70,226

The Volkswagen Group performs a credit assessment of borrowers in all loan and lease agreements, using scoring systems for the high-volume business and rating systems for corporate customers and receivables from dealer financing. Receivables rated as good are contained in risk class 1. Receivables from customers whose credit rating is not good but have not yet defaulted are contained in risk class 2.

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MATURITY ANALYSIS OF THE GROSS CARRYING AMOUNTS OF FINANCIAL ASSETS THAT ARE PAST DUE AND NOT IMPAIRED

 

 

 

 

Past due by:

 

Gross carrying amount

€ million

 

up to 30 days

 

30 to 90 days

 

more than 90 days

 

Dec. 31, 2009

Measured at amortized cost

 

 

 

 

 

 

 

 

Financial services receivables

 

2,339

 

1,110

 

312

 

3,760

Trade receivables

 

645

 

329

 

130

 

1,104

Other receivables

 

54

 

16

 

31

 

101

Measured at fair value

 

 

 

 

 

 

3,039

 

1,454

 

472

 

4,966

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Past due by:

 

Gross carrying amount

€ million

 

up to 30 days

 

30 to 90 days

 

more than 90 days

 

Dec. 31, 2010

Measured at amortized cost

 

 

 

 

 

 

 

 

Financial services receivables

 

1,270

 

480

 

 

1,750

Trade receivables

 

834

 

274

 

204

 

1,312

Other receivables

 

13

 

9

 

29

 

51

Measured at fair value

 

 

 

 

 

 

2,117

 

763

 

233

 

3,113

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CARRYING AMOUNTS OF FINANCIAL INSTRUMENTS THAT WOULD OTHERWISE BE PAST DUE WHOSE TERMS HAVE BEEN RENEGOTIATED

€ million

 

Dec. 31, 2010

 

Dec. 31, 2009

Measured at amortized cost

 

 

 

 

Financial services receivables

 

1,338

 

1,330

Trade receivables

 

27

 

21

Other receivables

 

 

0

Measured at fair value

 

 

 

 

1,364

 

1,351

The collateral held by the Volkswagen Group relates mainly to financial services receivables and trade receivables. Collateral comprises vehicles and assets transferred as security, as well as guarantees and real property liens.

Collateral that was accepted in fiscal year 2010 for financial assets that are past due and not impaired and for financial assets that are individually impaired was recognized in the balance sheet in the amount of €90 million (previous year: €276 million). This mainly relates to vehicles.

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