Additional Balance Sheet Disclosures in accordance with IFRS 7 (Financial Instruments)

CARRYING AMOUNT OF FINANCIAL INSTRUMENTS BY IAS 39 MEASUREMENT CATEGORY
€ million	Dec. 31, 2013	Dec. 31, 2012

Financial assets at fair value through profit or loss	373	556
Loans and receivables	111,010	102,451
Available-for-sale financial assets	12,435	11,306
Financial liabilities at fair value through profit or loss	762	607
Financial liabilities measured at amortized cost	147,346	138,506

RECONCILIATION OF BALANCE SHEET ITEMS TO CLASSES OF FINANCIAL INSTRUMENTS

The following table shows the reconciliation of the balance sheet items to the relevant classes of financial instruments, broken down by the 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 generally deemed to be their carrying amount.

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RECONCILIATION OF BALANCE SHEET ITEMS TO CLASSES OF FINANCIAL INSTRUMENTS AS OF DECEMBER 31, 2012
	MEASURED AT FAIR VALUE	MEASURED AT AMORTIZED COST		NOT WITHIN SCOPE OF IFRS 7	BALANCE SHEET ITEM AT DEC. 31, 2012
€ million	Carrying amount	Carrying amount	Fair value	Carrying amount

Noncurrent assets
Equity-accounted investments	–	–	–	7,309	7,309
Other equity investments	2,606	1,265	1,265	–	3,870
Financial services receivables	–	49,785	50,491	–	49,785
Other financial assets	2,226	4,206	4,279	–	6,431

Current assets
Trade receivables	–	10,099	10,099	–	10,099
Financial services receivables	–	36,911	36,911	–	36,911
Other financial assets	832	5,041	5,041	–	5,872
Marketable securities	7,433	–	–	–	7,433
Cash, cash equivalents and time deposits	–	18,488	18,488	–	18,488

Noncurrent liabilities
Noncurrent financial liabilities	–	63,603	66,183	–	63,603
Other noncurrent financial liabilities	1,587	810	816	–	2,397

Current liabilities
Put options and compensation rights granted to noncontrolling interest shareholders	–	–	–	–	–
Current financial liabilities	–	54,060	54,060	–	54,060
Trade payables	–	17,268	17,268	–	17,268
Other current financial liabilities	1,230	3,195	3,195	–	4,425

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RECONCILIATION OF BALANCE SHEET ITEMS TO CLASSES OF FINANCIAL INSTRUMENTS AS OF DECEMBER 31, 2013
	MEASURED AT FAIR VALUE	MEASURED AT AMORTIZED COST		NOT WITHIN SCOPE OF IFRS 7	BALANCE SHEET ITEM AT DEC. 31, 2013
€ million	Carrying amount	Carrying amount	Fair value	Carrying amount

Noncurrent assets
Equity-accounted investments	–	–	–	7,934	7,934
Other equity investments	2,666	1,274	1,274	–	3,941
Financial services receivables	–	51,198	53,200	–	51,198
Other financial assets	2,414	4,626	4,593	–	7,040

Current assets
Trade receivables	–	11,133	11,133	–	11,133
Financial services receivables	–	38,386	38,386	–	38,386
Other financial assets	1,680	4,911	4,911	–	6,591
Marketable securities	8,492	–	–	–	8,492
Cash, cash equivalents and time deposits	–	23,178	23,178	–	23,178

Noncurrent liabilities
Noncurrent financial liabilities	–	61,517	62,810	–	61,517
Other noncurrent financial liabilities	1,169	1,136	1,153	–	2,305

Current liabilities
Put options and compensation rights granted to noncontrolling interest shareholders	–	3,638	3,563	–	3,638
Current financial liabilities	–	59,987	59,987	–	59,987
Trade payables	–	18,024	18,024	–	18,024
Other current financial liabilities	1,070	3,456	3,456	–	4,526

Uniform valuation techniques and inputs are used to measure fair value. The fair value of Level 2 and 3 financial instruments is measured in the individual divisions on the basis of Group-wide specifications. The measurement techniques used are explained in the disclosures on accounting policies. The fair value of put options and compensation rights granted to noncontrolling interest shareholders is calculated using a present value model based on the contractually agreed cash settlement, including cash compensation, as well as the minimum statutory interest rate and a risk-adjusted discount rate for a matching maturity. For further information, please see the disclosures on the basis of consolidation. The fair value of Level 3 receivables was measured by reference to individual expectations of losses; these are based to a significant extent on the Company’s assumptions about counterparty credit quality.

The following table contains an overview of the financial assets and liabilities measured at fair value by level:

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FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE BY LEVEL
€ million	Dec. 31, 2012	Level 1	Level 2	Level 3

Financial assets at fair value through profit or loss
Derivatives	3,057	–	2,939	119

Available-for-sale financial assets
Other equity investments	2,606	2,606	–	–
Marketable securities	7,433	7,419	14	–
Financial assets measured at fair value	13,096	10,025	2,953	119

Financial liabilities at fair value through profit or loss
Derivatives	2,818	–	2,757	60
Financial liabilities measured at fair value	2,818	–	2,757	60

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€ million	Dec. 31, 2013	Level 1	Level 2	Level 3

Financial assets at fair value through profit or loss
Derivatives	4,094	–	4,062	32

Available-for-sale financial assets
Other equity investments	2,666	2,666	–	–
Marketable securities	8,492	8,410	83	–
Financial assets measured at fair value	15,252	11,076	4,144	32

Financial liabilities at fair value through profit or loss
Derivatives	2,239	–	2,021	218
Financial liabilities measured at fair value	2,239	–	2,021	218

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FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT AMORTIZED COST BY LEVEL
€ million	Dec. 31, 2012	Level 1	Level 2	Level 3

Fair value of financial assets measured at amortized cost
Other equity investments	1,265	–	226	1,039
Financial services receivables	87,402	–	85,361	2,041
Trade receivables	10,099	–	9,998	100
Other financial assets	9,320	39	9,266	14
Cash, cash equivalents and time deposits	18,488	17,816	672	–
Fair value of financial assets measured at amortized cost	126,573	17,855	105,524	3,195

Fair value of financial liabilities measured at amortized cost
Put options and compensation rights granted to noncontrolling interest shareholders	–	–	–	–
Trade payables	17,268	–	17,268	–
Financial liabilities	120,242	21,568	98,674	–
Other financial liabilities	4,010	2	4,003	5
Fair value of financial liabilities measured at amortized cost	141,521	21,571	119,945	5

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€ million	Dec. 31, 2013	Level 1	Level 2	Level 3

Fair value of financial assets measured at amortized cost
Other equity investments	1,274	–	186	1,088
Financial services receivables	91,586	–	89,889	1,698
Trade receivables	11,133	–	10,999	134
Other financial assets	9,504	166	9,313	26
Cash, cash equivalents and time deposits	23,178	22,013	1,165	–
Fair value of financial assets measured at amortized cost	136,675	22,179	111,551	2,945

Fair value of financial liabilities measured at amortized cost
Put options and compensation rights granted to noncontrolling interest shareholders	3,563	–	–	3,563
Trade payables	18,024	–	18,024	–
Financial liabilities	122,797	20,905	101,728	165
Other financial liabilities	4,609	63	4,507	40
Fair value of financial liabilities measured at amortized cost	148,993	20,967	124,258	3,768

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.

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CHANGES IN BALANCE SHEET ITEMS MEASURED AT FAIR VALUE BASED ON LEVEL 3
€ million	Financial assets measured at fair value	Financial liabilities measured at fair value

Balance at Jan. 1, 2012	8,584	595
Foreign exchange differences	0	0
Total comprehensive income	1,784	486
recognized in profit or loss	1,785	423
recognized in other comprehensive income	–1	63
Additions (purchases)	–	–
Sales and settlements	–10,199	21
Transfers into Level 2	–51	–28
Balance at Dec. 31, 2012	119	60

Total gains or losses recognized in profit or loss	1,785	423
Net other operating expense/income	9	–3
of which attributable to assets/liabilities held at the reporting date	–13	24
Financial result	1,776	426
of which attributable to assets/liabilities held at the reporting date	3	–228

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€ million	Financial assets measured at fair value	Financial liabilities measured at fair value

Balance at Jan. 1, 2013	119	60
Foreign exchange differences	0	0
Total comprehensive income	–70	–197
recognized in profit or loss	–63	–182
recognized in other comprehensive income	–7	–16
Additions (purchases)	2	2
Sales and settlements	–8	20
Transfers into Level 2	–11	–22
Balance at Dec. 31, 2013	32	218

Total gains or losses recognized in profit or loss	–63	–182
Net other operating expense/income	–	–
of which attributable to assets/liabilities held at the reporting date	–	–
Financial result	–63	–182
of which attributable to assets/liabilities held at the reporting date	–65	–184

The transfers between the levels of the fair value hierarchy are reported at the respective reporting dates. 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. There were no transfers between other levels of the fair value hierarchy.

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, 2013, profit would have been €6 million (previous year: €4 million) higher (lower) and equity would have been €9 million (previous year: €18 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 €12 million (previous year: €14 million) higher. If the assumed enterprise values had been 10% lower, profit would have been €21 million (previous year: €25 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, 2013, profit after tax would have been €169 million higher. If the prices for the used cars covered by the residual value protection model had been 10% lower as of December 31, 2013, profit after tax would have been €169 million lower.

OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES

The following tables contain information about the effects of offsetting in the balance sheet and the potential financial effects of offsetting in the case of instruments that are subject to a legally enforceable master netting arrangement or a similar agreement.

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€ million	Gross amounts of recognized financial assets	Gross amounts of recognized financial liabilities set off in the balance sheet	Net amounts of financial assets presented in the balance sheet	Financial instruments	Collateral received	Net amount at Dec. 31, 2012

				AMOUNTS THAT ARE NOT SET OFF IN THE BALANCE SHEET

Derivatives	3,057	–	3,057	–1,833	–	1,224
Financial services receivables	86,958	–262	86,696	–	–35	86,661
Trade receivables	10,198	–99	10,099	0	–290	9,808
Marketable securities	7,433	–	7,433	–	–	7,433
Cash, cash equivalents and time deposits	18,488	–	18,488	–	–	18,488
Other financial assets	13,197	–80	13,117	–3	–	13,114

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€ million	Gross amounts of recognized financial assets	Gross amounts of recognized financial liabilities set off in the balance sheet	Net amounts of financial assets presented in the balance sheet	Financial instruments	Collateral received	Net amount at Dec. 31, 2013

				AMOUNTS THAT ARE NOT SET OFF IN THE BALANCE SHEET

Derivatives	4,094	–	4,094	–1,101	–	2,992
Financial services receivables	89,870	–286	89,584	–	–31	89,554
Trade receivables	11,269	–135	11,133	0	–348	10,786
Marketable securities	8,492	–	8,492	–	–	8,492
Cash, cash equivalents and time deposits	23,178	–	23,178	–	–	23,178
Other financial assets	13,520	–42	13,478	–1	–	13,478

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€ million	Gross amounts of recognized financial liabilities	Gross amounts of recognized financial assets set off in the balance sheet	Net amounts of financial liabilities presented in the balance sheet	Financial instruments	Collateral pledged	Net amount at Dec. 31, 2012

				AMOUNTS THAT ARE NOT SET OFF IN THE BALANCE SHEET

Put options and compensation rights granted to noncontrolling interest shareholders	–	–	–	–	–	–
Derivatives	2,818	–	2,818	–1,785	–	1,032
Financial liabilities	117,663	–	117,663	–	–1,769	115,894
Trade payables	17,340	–72	17,268	0	–	17,268
Other financial liabilities	4,375	–369	4,005	–3	–	4,003

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€ million	Gross amounts of recognized financial liabilities	Gross amounts of recognized financial assets set off in the balance sheet	Net amounts of financial liabilities presented in the balance sheet	Financial instruments	Collateral pledged	Net amount at Dec. 31, 2013

				AMOUNTS THAT ARE NOT SET OFF IN THE BALANCE SHEET

Put options and compensation rights granted to noncontrolling interest shareholders	3,638	–	3,638	–	–	3,638
Derivatives	2,236	–	2,236	–1,072	–	1,165
Financial liabilities	121,504	–	121,504	–	–2,060	119,444
Trade payables	18,162	–138	18,024	–1	–	18,024
Other financial liabilities	4,921	–326	4,595	–	–	4,595

The “Financial instruments” column shows the amounts that are subject to a master netting arrangement but were not set off because they do not meet the criteria for offsetting in the balance sheet. The ”Collateral received” and “Collateral pledged” columns show the amounts of cash collateral and collateral in the form of financial instruments received and pledged for the total assets and liabilities that do not meet the criteria for offsetting in the balance sheet.

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CHANGES IN CREDIT RISK VALUATION ALLOWANCES ON FINANCIAL ASSETS
€ million	Specific valuation allowances	Portfolio-based valuation allowances	2013	Specific valuation allowances	Portfolio-based valuation allowances	2012

Balance at Jan. 1	2,072	1,253	3,325	1,983	1,050	3,033
Exchange rate and other changes	–75	–37	–113	–20	–13	–34
Changes in consolidated Group	2	0	2	46	13	59
Additions	887	393	1,280	901	383	1,284
Utilization	383	–	383	399	–	399
Reversals	308	133	441	416	203	619
Reclassification	43	–43	0	–23	23	0
Balance at Dec. 31	2,237	1,433	3,670	2,072	1,253	3,325

The valuation allowances mainly relate to the credit risks associated with the financial services business.

The trade receivables and receivables from customer financing include transferred receivables in the total amount of €17 million (previous year: €8 million) and €– million (previous year: €570 million) respectively that were not derecognized in their entirety because the credit risk remains with the Volkswagen Group. The total purchase price received of €8 million (previous year: €8 million) and €– million (previous year: €553 million) respectively is reported in financial liabilities. The fair values of the receivables and liabilities are not materially different to their carrying amounts.

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Additional Balance Sheet Disclosures in accordance with IFRS 7 (Financial Instruments)

RECONCILIATION OF BALANCE SHEET ITEMS TO CLASSES OF FINANCIAL INSTRUMENTS

OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES