Financial Report 2021
Volkswagen Financial Services N.V.
Amsterdam
Volkswagen Financial Services N.V.
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Contents
Supervisory Board Report 3
Management Report 4
Balance sheet as at 31 December 2021 10
Income statement for the year ended 31 December 2021 12
Cash flow statement for the year ended 31 December 2021 13
Notes to the financial statements 14
Other information 40
Independent auditor’s report 41
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Supervisory Board Report
The balance sheet total and the result for the financial year 2021 of Volkswagen Financial Services
N.V. (‘FSNV’ or ‘the Company’) are in line with the expected development of the Company.
The solvency and liquidity of the Company remained good. The issuance activities of FSNV in the
capital markets were coordinated with Volkswagen Financial Services AG.
The diesel issue, which surfaced in 2015, has been addressed by the ultimate group parent company,
Volkswagen AG, by entering into settlement agreements with the authorities in the respective
countries.
In 2021, the credit rating agencies updated their rating assessments for Volkswagen Financial
Services AG. Moody’s maintained the rating at P-2 / A3 (short term / long term) and changed the
outlook to stable while Standard & Poor’s maintained the rating at A-2 / BBB+ (short term / long term)
and also changed the outlook to stable.
The Management Board informed the Supervisory Board in 2021 continuously on the developments
regarding issuance activities and risk exposure. Risk limits set by the Supervisory Board were
adhered to.
The Covid-19 pandemic constitutes a challenging environment for governments and economies
worldwide. Despite this, FSNV has maintained its funding and lending activities with Group
companies without taking on additional risks.
The Supervisory Board does not divide the responsibilities into sub-committees, but takes charge of
all tasks that such committees traditionally would fulfil.
During the Annual General Meeting held on 15 June 2021, Ernst & Young Accountants LLP,
Rottererdam, was appointed as independent auditors for the fiscal year 2021. The independent
auditors audited the annual financial statement of FSNV and issued an unqualified audit opinion.
Amsterdam, 22 March 2022
………………………………………
Original was signed by
Frank Fiedler, Chairman of the Supervisory Board
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Management Report
Business Strategy and Objectives
Volkswagen Financial Services N.V. (‘FSNV’), founded in 1983, is one of the funding vehicles of
Volkswagen Financial Services AG (‘FSAG’) and its subsidiaries. FSNV raises funds by issuing
bonds and commercial papers in the international capital markets and lends the proceeds to
Volkswagen Financial Services companies and joint ventures. FSNV provides the capital market
funding as a service within Volkswagen Financial Services AG Group, thereby achieving an adequate
return commensurate with the efforts and associated risks.
FSNV is performing its tasks using 14 employees under service agreements with its sister companies
Volkswagen International Finance N.V. and Volkswagen Finance Overseas B.V.
Funding
Basis for the issuing activities are the EUR 35 billion Debt Issuance Programme (‘DIP’) that adheres
to the European Prospectus Directive and is regularly updated, as well as the EUR 7.5 billion
Commercial Paper (‘CP’) Programme. Bonds are listed with the Luxembourg Stock Exchange and
are traded on regulated markets. All issuances are fully guaranteed towards the investors by FSAG.
Therefore, the FSNV rating by Moody’s and Standard & Poor’s is derived from the FSAG rating.
Moody’s assessed the risk with Prime-2 / A3 (short/long term) with a stable outlook while Standard
& Poor’s assessed the rating with A-2 / BBB+ (short/long term) with a stable outlook in 2021.
Throughout 2021, FSNV raised a EUR equivalent of approx. 2 billion under the DIP (2020: EUR 1.7
billion) with multi-tranche bonds – no commercial papers issued (2020: EUR equivalent 0.5 billion).
The proceeds were granted to Volkswagen Financial Services AG Group companies.
In 2021, FSNV also redeemed bonds with a EUR equivalent of 1.5 billion (2020: EUR 0.9 billion) and
CPs totalling EUR 0.03 billion (2020: EUR 0.5 billion). Borrowings from VW Group companies
amounted to EUR 1.4 billion (2020: EUR 1.5 billion), repayments amounted to EUR 1.7 billion (2020:
0.2 billion).
Financial results
FSNV was able to increase its lending assets from EUR 9.6 billion to EUR 10.1 billion, assisting
companies in the Financial Services Division to maintain their market position. All outstanding loans
have been fully performing.
FSNV generated a profit after tax of EUR 9.7 million in 2021 against EUR 10.2 million in 2020. The
Company generates income from the FSAG Group financing business. Interest surplus amounted
to EUR 15.1 million (2020: EUR 15.6 million).
Net-cash from operating activities amounted to EUR 43.1 million (2020: EUR 17.2 million).
In 2021, FSNV paid a dividend of EUR 159 million to its shareholder.
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Risks
FSNV is exposed to business and financial risks. Business risks comprise inter alia legal, operational,
personnel, reputational and compliance risks. FSNV is adhering to the Governance, Risk and
Compliance Guidelines of Volkswagen Financial Services AG managing the aforementioned risks
within the FSAG Group policies.
From an operational point of view the Covid pandemic required an adjustment in the office
attendance. Following the guidelines from the Dutch government, employees have been asked to
work from home as much as possible. The IT-environment was conducive to facilitate the access to
the central systems at VW Financial Services Digital Solutions GmbH, Braunschweig, the central IT-
provider for the VW Financial Services Division. The internal control system has proven to work
effectively also under the remote working conditions, no negative incidences have been observed.
The main financial risks of FSNV are liquidity risk, credit risk, currency risk and interest rate risk.
Liquidity risk is defined as the risk of not being able to meet own payment obligations in full or when
due.
Credit risk is defined as the risk of incurring losses as a result of a default of a borrower or bank.
Currency risk refers to the potential loss in open currency positions arising from adverse changes in
exchange rates.
Interest rate risk occurs because of fixed and floating interest rate mismatches between asset and
liability items on the balance sheet.
The Supervisory Board has established narrow risk limits to restrict these risks and achieve a low
risk exposure.
Risk policies
The Board of Management is responsible for the internal control, the management of risks within the
company and for the assessment of the effectiveness of the control systems.
Liquidity risk is contained by extending loan amounts sourced from bond or CP-issuances to
Volkswagen Financial Services AG Group companies at identical tenors as the funded amounts.
Borrowers agreed to repay their loans on the same due date when FSNV’s own payment obligations
to the capital markets become due. In addition, FSNV may issue loans to VWAG-Group companies
funded in whole or in part by its equity position.
Credit risk is addressed by monitoring the financial stability of the Volkswagen Financial Services AG
Group borrowers and external banks. A fair value and impairment trigger assessment is performed
for Group companies at least once a year or in case of need. Banks are monitored centrally at
Volkswagen Financial Services AG based on rating and financial analyses. Financial transactions
are only conducted with approved banks.
Currency risk is limited by matching funding and lending currency amounts. In case funding and
lending currency do not match, derivatives are used to achieve closed positions.
Interest rate risk is contained by matching the fixed and floating interest rate terms of the funding and
lending amounts. Mismatches are closed using interest rate derivatives.
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For remaining mismatches, the Supervisory Board has defined narrow limits. FSNV uses adequate
tools to assess and to monitor risks. On a monthly basis, a detailed mismatch report, containing all
relevant risks, is presented to the management. In 2021, limits were not exceeded.
Diesel issue
In September 2015, the California Air Resources Board (CARB) and the US Environmental
Protection Agency (EPA) publicly announced that irregularities in relation to nitrogen oxide emissions
had been discovered in emission tests on certain vehicles with diesel engines, resulting in violations
of US environmental laws.
Depending on the different emissions regulations in the various countries, Volkswagen has rectified
and is rectifying the diesel engine software, applied technical measures, compensated owners for
reduced residual values or took back affected cars. The financial impact of this incident to the
Volkswagen AG Group is discussed in the quarterly and annual reports of Volkswagen AG.
The majority of FSNV’s borrowers have either financed cars with affected diesel engines or have
them in their lease car inventory. However, investors and the financial markets assess the risks FSNV
is exposed to on the background of the guarantee by FSAG, since investors have full recourse to
FSAG. FSNV management has also assessed the impact of the “diesel emission issue” on the
borrowers of FSNV by analysing in detail the financial situation of the borrowers as well as budget
forecasts and concluded that FSNV is not exposed to higher credit risk.
Adherence to tax and regulatory requirements
The Company had its tax returns up to and including 2019 reviewed by the Dutch Tax Authorities.
For the tax return 2020, a final assessment has not yet been received.
Due to its issuing activities in the capital markets and the listing at the Luxemburg Stock Exchange,
the Company is complying with the regulatory requirements regarding the yearly submission of its
annual financial statements to the Dutch Financial Market Authority (the “AFM”) and the approval
requirements for its prospectuses by the Commission de Surveillance du Secteur Financier of the
Grand Duchy of Luxembourg (the "CSSF").
Compliance & Integrity
Acting with Integrity, Compliance and honesty is an essential prerequisite for the success of the
Volkswagen Group. For this reason, compliance with national and international laws and regulations,
internal rules and guidelines and voluntary commitments is among FSNV’s most important principles
The focus of FSNV’s compliance organization is on preventing corruption, breaches of trust and
money laundering and thereby reducing the risk of unlawful actions. The Volkswagen Group’s Code
of Conduct is established throughout the Group, and thus also within FSNV. It is the main tool for
reinforcing awareness of good conduct, ethical principles and an integrity culture among the
employees and providing them assistance, as well as suitable contacts in case of uncertainty. Next
to the Volkswagen Group Code of Conduct, other Group policies and guidelines on specific
compliance issues have been implemented within FSNV. Where laws and regulations have been
violated, the Volkswagen Group Whistleblower System is a suitable tool for taking appropriate
actions where misconduct is proven.
Non-financial matters
FSNV is not obliged to disclose a non-financial statement and refers to the combined, separate non-
financial report of Volkswagen AG for the fiscal year 2021, which will be available on the website
www.volkswagenag.com.
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Global spread of Coronavirus (SARS-COV-2)
In the light of the ongoing COVID-19 pandemic, the Board of Management has performed an analysis
with regard to its potential effects on the Company and its liquidity. The fundamental risk to the
Company is that Volkswagen AG is unable to meet its commitments to the Company under the terms
of the guarantee in situations where group companies are unable to repay loans provided by the
Company. Based on the analysis performed, the Board of Management believes that the impact for
FSNV is limited.
Expectations 2022
FSNV will continue in 2022 its issuing activities in the capital markets. In line with the long-term
business strategy, the Volkswagen Financial Services AG Group plans to develop new markets and
to improve its position in existing markets.
We expect that FSAG will keep FSNV’s capital reserve on an adequate level. As several Volkswagen
Financial Services companies worldwide are going to use the attractive European funding
opportunities, FSNV foresees additional requests for refinancing which will be taken care of with
reinstated and increased capital market issuances under the DIP and CP-programmes.
Based on this assumption, we expect a moderate increase in total business volume for FSNV in
2022. Taking into account the expected growth in business volume and the interest environment,
interest income should increase proportionately. The financial statements have been prepared under
the going concern assumption.
In principle, one third of the Management Board should be female; however, currently there is only
one Managing Director on the Management Board of the Company. The Company will deal with this
recommendation in the future.
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The Management Board declares to the best of their knowledge:
1. the financial statements for 2021 give a true and fair view of the assets, the liabilities, the
financial position and the results of the company; and
2. the management report gives a true and fair view of the company’s situation as at the
balance sheet date, the events that occurred during 2021 and the risks to which the company
is exposed.
Amsterdam, 22 March 2021
Original has been signed by
Christpher R. Norrod, Managing Director
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Financial statements
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Balance sheet as at 31 December 2021
(after proposed appropriation of profit)
31 December 2021 31 December 2020
Ref. EUR’000 EUR’000 EUR’000 EUR’000
Assets
Fixed assets
Financial fixed assets:
Loans to Volkswagen Group
companies
5 5,897,986 6,144,710
Loans to affiliates of the
Volkswagen Group
5 525,132 388,969
Total fixed assets
6,423,118 6,533,679
Current assets
Receivables due from
Volkswagen Group companies
6 3,216,892 2,604,777
Receivables due from affiliates
of the Volkswagen Group
6 426,455 495,827
Loans to external parties 7 500
500
Other assets 8 37,544 48,110
Prepaid and deferred charges 9 21,689 15,322
Total current assets
3,703,080 3,164,536
Cash at banks and in hand
10 12,038 2,860
Total assets
10,138,236 9,701,075
The accompanying notes are integral parts of these financial statements.
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Liabilities
31 December 2021 31 December 2020
Ref. EUR’000 EUR’000 EUR’000 EUR’000
Shareholder’s equity and
liabilities
Shareholde
r
’s equity
11
Issued and paid-up share
capital
454
454
Share premium reserve 1,115,000 1,115,000
Retained earnings 10,680 159,951
Total shareholder’s equity
1,126,134 1,275,405
Long-term liabilities
Bonds 12 5,371,421 5,087,921
Liabilities to Volkswagen
Group companies
12 863,348 1,283,908
Total long-term liabilities
6,234,769 6,371,829
Current liabilities
Bonds 13 2,014,123 1,406,507
Liabilities to Volkswagen
Group companies 13 675,260 533,712
Commercial papers 13 - 30,015
Other liabilities 14 69,597 68,474
Deferred income 15 18,353 15,133
Total current liabilities 2,777,333 2,053,841
Total shareholder’s equity
and liabilities
10,138,236 9,701,075
The accompanying notes are integral parts of these financial statements.
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Income statement for the year ended 31 December 2021
The accompanying notes are integral parts of these financial statements.
2021 2020
Ref. EUR’000 EUR’000 EUR’000 EUR’000
Net financial income
Interest income and similar
income
17 194,624 149,888
Interest expenses and similar
expenses
17 (179,731) (134,426)
Other operating income 18 189 136
Total net financial income
15,082 15,598
Expenses
Other operating expenses 19 (49) (42)
General and administrative
expenses 20 (2,233) (2,108)
Total expenses
(2,282) (2,150)
Profit and (loss) before
income taxes
12,800 13,448
Taxation on result on ordinary
activities
24 (3,071) (3,276)
Net profit and (loss) after
taxation
9,729 10,172
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Cash flow statement for the year ended 31 December 2021
2021 2020
EUR’000 EUR’000 EUR’000 EUR’000
Cash (used in) generated from
operations
Interest received 170,291 134,915
Interest paid (118,774) (108,823)
Other operating income - -
Guaranty fees paid (4,379) (3.967)
General and other Expenses paid (2,315) (1.635)
Corporate income tax received/ paid (1,706) (3.294)
Net cash from/ used in operating activities 43,117 17,196
Cash flow from investment activities
Loans issued to VW Group companies
& affiliates of the Volkswagen Group
(13,520,544) (7,007,963)
Collection of loans to VW Group companies
& affiliates of the Volkswagen Group
13,296,012 4,659,700
Net cash from/ used in investment activities (224,532) (2,348,263)
Cash flow from financing activities
Proceeds from borrowings 3,437,184 3,248,598
Repayment of borrowings (3,188,675) (1,010,662)
Proceeds from commercial papers - 55,021
Repayment of commercial papers (30,015) (45,017)
Derivatives 131,099 82,296
Dividends paid (159,000) -
Net cash from/ used in financing activities 190,593 2,330,236
Net cash flows
9,178 (831)
Balance as at 1 January
2,860 3,691
Movement
9,178 (831)
Balance as at 31 December
12,038 2,860
The accompanying notes are integral parts of these financial statements.
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Notes to the financial statements
1. General
1.1 Activities
Volkswagen Financial Services N.V. (‘FSNV’ or ‘the Company’), founded in 1983, is a 100%
subsidiary of Volkswagen Finance Overseas BV (‘Overseas’), who in turn is a 100% subsidiary of
Financial Services AG (‘FSAG’). The ultimate parent company is Volkswagen AG (VWAG).
FSNV’s registered office is located at Paleisstraat 1, 1012 RB Amsterdam, The Netherlands. The
Company is registered with the Dutch Register of Commerce under No. 33172400. FSNV maintains
a website at www.vwfs.nl.
The main purpose of the Company is the financing of and participation in Volkswagen AG Group
companies. FSNV has access to several funding sources such as bonds, and commercial paper as
well as inter-company loans.
All external issuances of financial instruments are guaranteed by FSAG in case FSNV does not meet
its obligations towards the holders of these instruments. FSNV has lent more than 95% of the
proceeds of these borrowings to Group companies or affiliates.
Due to its issuing activity in the capital markets, FSNV is subject to the regulatory supervision by the
Dutch Financial Market Authority (Autoriteit Financiële Markten, ‘AFM’) and has to submit its yearly
and half-yearly annual reports to the AFM.
Bonds issued by FSNV are listed at the Luxemburg Stock Exchange. The bond prospectuses have
been approved by the Commission de Surveillance du Secteur Financier of the Grand Duchy of
Luxembourg (‘CSSF’).
1.2 Related parties
All legal entities that can be controlled, jointly controlled or significantly influenced by FSNV are
considered to be related parties. Also entities (and their subsidiaries and affiliated companies) which
can control or significantly influence the Company are considered to be related parties. In addition,
statutory directors, other key management of the Company or the ultimate parent company and close
relatives are regarded as related parties.
1.3 Note to the cash-flow statement
Consolidated cash flows for the whole Volkswagen Financial Services Group are included in the
Volkswagen AG consolidated financial statements; therefore a separate cash flow statement for the
Company is not required by Dutch law. To be in line with practice in the capital market, FSNV
prepares a cash flow statement, using the direct method.
The cash items disclosed in the cash flow statement are comprised of cash and cash equivalents.
Cash flows denominated in foreign currencies have been translated at average exchange rates.
Exchange differences affecting cash items are included in the respective amounts.
Cash from loans granted is included in cash from / used in investment activities. Cash from
borrowings and the related derivatives, including capital increases/ dividends paid/ received are
included in cash from / used in financing activities.
All other movements are included in cash used/ generated from operations.
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1.4 Estimates
The preparation of financial statements in conformity with the relevant rules requires the use of
certain critical accounting estimates. It also requires management to exercise its judgement in the
process of applying the Group's accounting policies. If necessary for the purposes of providing the
view required under Section 362(1), Book 2, of the Dutch Civil Code, the nature of these estimates
and judgements, including the related assumptions, is disclosed in the notes to the financial
statement items in question. Estimates used for accounting of financial fixed assets and impairment
of loans granted are disclosed under note 2.4 and 2.10.
2. Principles of valuation of assets and liabilities
2.1 General
The financial statements are prepared in accordance with the statutory provisions of Part 9, Book 2
of the Dutch Civil Code. The financial statements are presented in EUR, which is also the Company’s
functional currency, and have been prepared on a going concern basis.
In general, assets and liabilities are stated at the amounts at which they were acquired or incurred,
or fair value. If not specifically stated otherwise, they are recognized at the amounts at which they
were acquired or incurred. The balance sheet and the income statement include references to the
notes.
Unless otherwise stated, amounts are shown in thousands of euros (EUR’000). All amounts shown
are rounded, so minor discrepancies may arise from addition of these amounts. Negligible
discrepancies could also arise in the comparison with the prior year owing to adjustments in the
rounding methodology.
2.2 Comparison with prior year
The principles of valuation and determination of result remain unchanged compared to the prior year.
2.3 Foreign currencies
Functional currency
The financial statements are presented in EUR, i.e. the functional and reporting currency of FSNV.
Transactions, receivables and liabilities
Transactions denominated in foreign currencies are initially recorded at the functional currency
exchange rates at the date of transaction. Monetary balance sheet items denominated in foreign
currencies are translated at the functional currency exchange rates at the balance sheet date. Non-
monetary balance sheet items that are measured at historical cost in a foreign currency are translated
at the functional exchange rates ruling at the date of transaction. Non-monetary balance sheet items
that are measured at current value are translated at the functional exchange rates ruling at the date
of valuation.
Foreign currency exchange rate results arising on the settlement or translation of monetary items
denominated in foreign currencies are recognized in the income statement.
2.4 Financial fixed assets
Loans to Volkswagen Group companies and affiliates of the Volkswagen Group and to
external parties
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These loans to Volkswagen Group companies, other participating interests and third parties are loans
with a remaining term of more than one year. Receivables disclosed under financial fixed assets are
recognized initially at fair value of the amount owed plus transaction costs. These receivables are
subsequently measured at amortized cost. The main rule is that amortized cost equals the carrying
amount of the asset net of any repayments on the principal and plus, or net of, the accumulated
amortization, calculated using the effective interest method, of the difference between the amount
upon initial recognition (including transaction costs) and the repayments. Straight-line amortization
in determining amortized cost is allowed as an alternative if straight-line amortization does not lead
to significant discrepancies with the effective interest method. If loans are issued at a discount or
premium, the discount or premium is recognized through profit or loss over the maturities of the loans
using the effective interest method. In addition, transaction costs are included in the initial valuation
and recognized in profit or loss as part of the effective interest method. Impairment losses are
deducted from amortized cost and expensed in the income statement.
2.5 Current assets
All current assets have a maturity within one year.
Receivables due from Volkswagen Group companies and affiliates of the Volkswagen
Group and to external parties
Receivables are recognized initially at fair value plus transaction costs and subsequently measured
at amortized cost.
Other assets
The interest receivables from banks arising from derivatives and income tax receivables are shown
under other assets and are initially valued at cost and subsequently at their amortized cost value.
Prepaid and deferred charges
Prepaid and deferred charges are initially valued at cost and are amortized over the remaining life of
the services or of the bonds.
Cash at banks and in hand
Cash at banks and in hand represents cash in hand and bank balances. Cash at banks and in
hand is carried at nominal value. Cash at banks denominated in foreign currencies are translated at
the period end-rate prevailing on the balance sheet date.
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2.6 Provisions
Provisions are recognized for legally enforceable or constructive obligations that exist at the balance
sheet date, and for which it is probable that an outflow of resources will be required and a reliable
estimate can be made.
Provisions are measured at the best estimate of the amount that is necessary to settle the obligation
as per the balance sheet date. The other provisions are carried at the nominal value of the
expenditure that is expected to be necessary in order to settle the obligation, unless stated otherwise.
If obligations are expected to be reimbursed by a third party, such reimbursement is included as an
asset in the balance sheet if it is probable that such reimbursement will be received when the
obligation is settled.
2.7 Long-term liabilities
Bonds
The bonds are initially valued at fair value plus transaction costs with subsequent measurement at
their amortized cost value. All long-term bonds have a remaining maturity of more than one year. No
assets were pledged as collateral by the Company.
Liabilities to Volkswagen Group companies
The liabilities to Volkswagen Group companies are initially valued at fair value with subsequent
measurement at their amortized cost value. All liabilities have a maturity of more than one year.
2.8 Current liabilities
Bonds
The bonds are initially valued at fair value plus transaction costs with subsequent measurement
valued at their amortized cost value. All short-term bonds are payable within one year.
Commercial papers
The commercial papers are initially valued at fair value plus transaction costs with subsequent
measurement valued at their amortized cost value.
Liabilities to Volkswagen Group companies
The liabilities to affiliated companies are initially valued at fair value with subsequent measurement
valued at their amortized cost value. All liabilities are payable within one year.
Other liabilities
The interest payables from banks arising from derivatives with a run-off period within one year are
shown under other liabilities and are valued at their nominal value.
Trade payables
The trade payables are initially valued at fair value and subsequently at their amortized cost value
and are payable within one year.
Other accrued liabilities
The accruals are valued at the expected costs.
Deferred income
The deferred income concerns premiums and cost compensations and is amortized over the
remaining life of the loans taken.
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Deferred income tax
Deferred tax liabilities are recognized to provide for timing differences between the value of the
assets and liabilities for financial reporting purposes on the one hand and for tax purposes on the
other. Deferred tax liabilities are calculated based on the tax rate prevailing on the balance sheet
date.
Current income tax
The current Dutch nominal tax rate of 25% has been applied.
2.9 Financial instruments
Loans included in financial and current assets, as well as liabilities and derivative financial
instruments, are stated at amortized cost. The Company applies hedge accounting to hedging
instruments when hedging interest and currency risk on borrowings and lendings. The Company
documents the relationship between hedging instruments and hedged items at the inception of the
transaction. Both the derivative and the hedged item are stated at amortized cost. The gain or loss
relating to any ineffective portion is recognized in the income statement within finance cost. For more
information about the value of the assets, assigned as hedged item, see notes 5 and 6, of the
liabilities see notes 12 and 13 and of the financial instruments see note 23. The Company has no
derivative financial instruments other than the ones used for hedging.
Hedge accounting
FSNV applies hedge accounting. Relationships between hedging instruments and hedged items are
documented at the inception of the transaction. FSNV also assesses, both at hedge inception and
on an ongoing basis, whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in fair values or cash flows of hedged items. This is done by comparing
the critical qualitative characteristics of the hedge instrument with those of the hedged position. If
there is an indication of ineffectiveness, the Company measures this potentially ineffective part by
conducting a quantitative ineffectiveness analysis.
Cost price hedge accounting
The Company applies cost price hedge accounting to hedge interest risk and currency-risk on
borrowings. For the following instruments, (Cross currency) interest rate swaps and FX Swaps
hedge accounting is applied.
In applying cost price hedge accounting, the initial recognition of, and the accounting policies for, the
hedging instrument are dependent on the hedged item, which has the following implications:
if the hedged item is recognized at cost in the balance sheet, the derivative instrument is also
stated at cost;
as long as the hedged item is not yet recognized in the balance sheet, the hedging instrument
is not re-measured (this applies, for instance, to hedging currency risks on future transactions);
if the hedged item qualifies as a monetary item denominated in a foreign currency, the derivative
instrument, where it has currency elements, is also stated at the period end-rate prevailing at
the balance sheet date.
The ineffective portion of the hedge is recognized directly in the income statement.
Hedge effectiveness is assessed by comparing the critical characteristics of the hedge instrument
with those of the hedged position. If there is an indication of ineffectiveness, the Company measures
this potentially ineffective part by conducting a quantitative ineffectiveness analysis.
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2.10 Impairment of financial assets
On each balance sheet date, the Company assesses whether there is any objective evidence that a
financial asset or group of financial assets is impaired. A financial asset is considered impaired if,
and only if, there is objective evidence of impairment as a result of one or more loss events that
occurred after the initial recognition of the asset and prior to the statement of financial position date,
and that loss event has had an impact on the estimated future cash flows of the financial asset that
can be reliably estimated.
For loans and receivables, the amount of impairment loss is measured as the difference between
the assets carrying amount and the present value of expected future cash flows discounted at the
assets original effective interest rate. The amount of the loss is included in the profit and loss
statement. If, in a subsequent period, the amount of impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed in the profit and loss statement.
3. Principles determination of result
3.1 General
Result is determined as the difference between the realisable value of services rendered and the
costs and other charges for the year. Results on transactions are recognized in the year in which
they are realised; losses are taken as soon as they are foreseeable.
3.2 Exchange rate differences
Exchange rate differences arising upon the settlement of monetary items are recognized in the
income statement in the year that they arise unless hedged, see note 17.
3.3 Interest income and similar income and interest expenses and similar expenses
Interest income and expenses are recognized on a pro-rata basis, taking into account the effective
interest rate of the assets and liabilities concerned. When recognising the interest charges, the
transaction cost on the loans received is taken into account.
3.4 Other operating income and expenses
Other operating income and expenses include income and expenses that are not directly attributable
to the interest income and expenses.
3.5 General and administrative expenses
These expenses include expenses such as personnel expenses, office expenses, consulting and
audit fees.
Labour and other costs
Services performed by Volkswagen International Finance N.V. (‘VIF’) for FSNV are charged at a
fixed amount. The fixed amount is evaluated in regular intervals. These costs include for example
salaries, rental costs and general costs.
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3.6 Taxation
Profit tax is calculated on the profit before taxation in the income statement, taking into account any
losses carried forward from previous financial years (insofar as these are not included in deferred
tax assets), tax-exempt items and non-deductible expenses. Account is also taken of changes in
deferred tax assets and deferred tax liabilities owing to changes in the applicable tax rates.
4. Financial instruments and risks
4.1 Market risk
General market risk due to events at Volkswagen AG
Government authorities in a number of jurisdictions worldwide have conducted and are conducting
investigations of Volkswagen Group regarding findings of irregularities in relation to exhaust
emissions from diesel engines in certain Volkswagen Group vehicles. The results of these and any
future investigations and criminal litigations, may have a material adverse effect on Volkswagen
Group's business, financial position, results of operations and reputation, as well as the prices of its
securities and its ability to make payments under its securities.
Volkswagen Financial Services N.V.’s commercial success largely depends on the financial health
and the reputation of the ultimate shareholder Volkswagen AG and due to the events, Volkswagen
Financial Services N.V. may not succeed in obtaining funds for financing requests in due time and
to the extent necessary.
Whilst the worldwide outbreak of the COVID-19 virus generally increases a number of the risk factors,
no direct impact on the company’s operations can be observed, as the Company has a sound
financial position (with equity reserves in place) which is expected to keep the Company in a
profitable position for the foreseeable future.
In addition, because of the investigations, Volkswagen Financial Services N.V. as an issuer may face
risks arising from legal disputes with investors claiming damages for alleged breaches of capital
market laws.
Currency risk
To avoid currency risk, the loans to FSAG group companies and to affiliates of the FSAG Group and
the related funding are generally matched in currency terms. If not, currency swaps are executed to
achieve the matched basis.
In cases where the matching cannot be achieved completely, the Supervisory Board has set small
currency limits for individual currencies. Matching policies are closely monitored and enforced.
Consequently, currency risk is comparatively remote. In 2021, the limits were not exceeded.
Interest rate risk
Based on funding requests by FSAG group companies and affiliates of the FSAG Group FSNV issues
bonds or commercial paper to investors matching the fixed or variable interest requirement of the
affliliated companies. In cases where the investor looks for a different interest structure, FSNV is
using interest rate swaps or cross currency interest rate swaps to convert the interest into the
structure required by affiliated companies. The Supervisory Board authorized FSNV to run a certain
interest rate risk. A limit system and tools to monitor and manage the risk have been set up. Interest
mismatches are permitted within a twelve-month period only. Therefore, the risk is comparatively
low. In 2021, no limits were exceeded.
Volkswagen Financial Services N.V.
21
Market risk fluctuations in terms of currency and interest rate risk did not have an impact on the
financial results since FSNV is closing open risk positions using derivatives according to the
established risk policies of FSNV.
4.2 Credit risk
The risk of default arising from loans granted, account balances and derivative financial instruments
involves the risk of default by counterparties.
FSNV is extending loans to FSAG group companies and to affiliates of FSAG Group, which are
granted according to the guidelines and instructions from FSAG, the guarantor of commercial paper
and capital market issuances by FSNV. The default risk of FSNV-borrowers has been analysed
based on financial reports, planning forecasts and discussions with FSAG headquarters. Based on
the analysis, the credit risk of FSNV-borrowers is considered to be remote.
For FSNV’s external bank counterparties risk is limited by a limit system centrally managed by FSAG
Group Risk Management taking into account also the credit assessments by the international rating
agencies. Credit risk with external counterparties materialises from account balances, deposits and
derivative transactions with a positive fair value. Given the business purpose of FSNV, account
balances and deposits are zero or kept to a minimum. Regarding the derivative transactions,
exposure is kept within the risk limits defined by FSAG Group Risk Management.
4.3 Liquidity risk
Based on funding requests by FSAG related parties, FSNV issues commercial paper and bonds to
investors. Funds taken from investors are extended with the same maturity to FSAG-Group
borrowers. In addition FSNV may issue loans to FSAG-Group companies in whole or in part funded
by its equity position.
In cases where this matching cannot be achieved the Supervisory Board has set narrow liquidity risk
limits. The Company monitors the limits on a daily basis. Against the background of the relatively
narrow limits and the strong financial solidity of the Volkswagen Group, the liquidity risk is remote. In
2021, no limits were exceeded. Notes issued by FSNV have the benefit of a Guarantee and Negative
Pledge (The Guarantee) given by Volkswagen Financial Services AG (The Guarantor) to the
noteholders.
The Debt Issuance Program under which FSNV is issuing bonds, is regularly updated to incorporate
current developments. FSNV also continues to issue Commercial Papers based on the existing
EUR 7.5 billion Commercial Paper Program to finance the requirements of FSAG group companies
and affiliates of FSAG group.
Based on the diversified funding strategy, Volkswagen Financial Service AG acted flexibly to
refinance its activities with the increased issuance of secured bonds (ABS), direct bank deposits and
bank credit facilities.
Volkswagen Financial Services N.V.
22
5. Financial fixed assets
Loans to Volkswagen Group companies and affiliates of the Volkswagen Group included in
financial fixed assets
The breakdown of the loans to Volkswagen Group companies and affiliates of the Volkswagen Group
is as follows:
Original
currency
Weighted
average
effective
interest
rate (%)
31 December 2021
Book value Fair value
EUR’000 EUR’000
Fixed asset loans to Volkswagen
GBP 1.58 5,331,781 5,574,077
Group companies
CZK 1.05 40,106 37,672
SEK 0.79 341,314 341,733
PLN 1.80 140,000 136,047
EUR 0.05 239,812 238,263
6,093,013 6,327,792
Fixed asset loans to affiliates NOK 2.52 180,105 184,051
Of the Volkswagen Group
EUR 0.04 150,000 148,879
330,105 332,930
Total fixed asset loans to Volkswagen
Group companies and affiliates of the
Volkswagen Group
6,423,118 6,660,722
The fair values are determined using the discounted cash flow model.
Because all loans are granted to companies and affiliates of the Volkswagen Group, the fair value
calculation takes into account the credit default swap rate of the Volkswagen Group traded in the
financial markets retrieved from Reuters. The country risk premium is based on the country in which
the counterparty is located.
By issuing a letter of comfort to the lenders, Volkswagen Financial Services AG declares that, as the
shareholder of its affliated companies, over which it has managerial control and/or in which it holds
a direct or indirect majority share of the share capital, it will exert its influence to ensure that the latter
meet their liabilities to lenders in the agreed manner. This is why the Company believes that the book
value equals the expected value, hence no impairment has been recorded.
The weighted average effective interest rate is calculated for the outstanding loans as per year end,
taking into account the duration in the current year.
Volkswagen Financial Services N.V.
23
For comparison, the fixed asset loans overview of 2020:
31 December 2020
Original
currency
Weighted
average
effective
interest
rate (%)
Book value Fair value
EUR’000 EUR’000
Fixed asset loans to Volkswagen
GBP 1.31 5,545,916 5,679,392
Group companies
KRW 2.61 140,000 135,999
SEK 0.73 381,067 384,514
EUR 0.17 77,727 77,537
6,144,710 6,277,442
Fixed asset loans to affiliates
NOK 1.75 238,969 243,144
Of the Volkswagen Group
EUR 0.44 150,000 149,928
388,969 393,072
Total fixed asset loans to Volkswagen
Group companies and affiliates of the
Volkswagen Group
6,533,679 6,670,514
The movement of the loans for the financial fixed assets and current receivables (note 6) due from
Volkswagen Group companies and affiliates of the Volkswagen Group consists of the following:
31 Dec 2021 31 Dec 2020
EUR’000 EUR’000
Beginning of the period
9,634,283 7,595,113
Loans advanced
13,520,544 7,007,963
Loan repayments received
(13,296,012) (4,659,700)
Interest accrued
37,643 32,241
Interest received
(32,241) (23,720)
FX difference on loans
202,248 (317,614)
End of the period
10,066,465 9,634,283
Long-term 6,423,118 6,533,679
Short-term 3,643,347 3,100,604
Volkswagen Financial Services N.V.
24
6. Receivables due from Volkswagen Group companies and affiliates
of the Volkswagen Group
Original
currency
Weighted
average
effective
interest
rate (%)
31 December 2021
Book value Fair value
EUR’000 EUR’000
Current receivables due from
EUR 0.01 425,915 426,027
Volkswagen Group companies
GBP 1.41 1,994,085 2,063,732
PLN 0.82 370,000 372,404
KRW 2.61 140,000 135,013
SEK 0.93 252,569 255,576
Accrued interest and other receivables EUR 34,330 34,330
3,216,899 3,287,082
Current receivables due from EUR 0.39 150,000 150,546
affiliates of the Volkswagen
NOK 1.69 170,135 170,794
Group
TRY 1.50 103,000 106,697
Accrued interest and other receivables EUR 3,313 3,313
426,448 431,350
Total current receivables due from
Volkswagen Group companies and
affiliates
3,643,347 3,718,432
For the determination of the market values, see note 5.
As mentioned in note 2.9, the terms of all outstanding loans to Volkswagen Group companies and
affiliates are to a large extend matched with the corresponding external borrowings or hedged by
using derivatives to match the terms of the bonds and loans from Volkswagen Group companies.
Implying that even though the Company has exposure to interest rate risk and currency risk,
exposure is limited through these effective risk management strategies.
Volkswagen Financial Services N.V.
25
For comparison, the overview of 2020:
Original
currency
Weighted
average
effective
interest
rate (%)
31 December 2020
Book value Fair value
EUR’000 EUR’000
Current receivables due from
EUR 0.26 121,286 121,330
Volkswagen Group companies GBP 1.08 1,160,777 1,158,611
PLN 0.37 1,076,931 1,036,930
KRW 2.95 70,000 67,127
SEK 0.84 149,541 149,843
Accrued interest and other receivables EUR 26,242 26,242
2,604,777 2,560,083
Current receivables due from
EUR 0.45 180,000 180,001
affiliates of the Volkswagen
NOK 1.08 47,813 47,854
Group
TRY 3.64 262,015 269,899
Accrued interest and other receivables EUR 5,999 5,999
495,827 503,753
Total current receivables due from
Volkswagen Group companies and
affiliates
3,100,604 3,063,836
7. Loans to external parties
This balance sheet position contains loans to external parties:
Company Original
currency
Interest rate Amount
In EUR
Maturity
Pon Auto Import
Nederland B.V., Leusden
EUR
0.03 200,000 25-05-2022
Pon Automotive B.V.,
Leusden
EUR 0.03 150,000 25-05-2022
Pon Holdings B.V., Almere EUR 0.03 150,000 25-05-2022
These Dutch companies do not belong to the Volkswagen Group. The loans are not guaranteed by
FSAG. The fair values of these loans approximate their carrying value.
The interest rates charged on the above loans are calculated on 1-year Euribor plus a margin based
on market price margin for investment graded companies.
Volkswagen Financial Services N.V.
26
For comparison, the overview of loans to external parties as at 31 December 2020:
Company Original
currency
Interest rate Amount
In EUR
Maturity
Pon Auto Import
Nederland B.V., Leusden
EUR
1.30 200,000 25-05-2021
Pon Automotive B.V.,
Leusden
EUR 1.30 150,000 25-05-2021
Pon Holdings B.V., Almere EUR 1.30 150,000 25-05-2021
8. Other assets
This account consists of the following:
31 Dec 2021 31 Dec 2020
EUR’000 EUR’000
Interest receivables from banks arising from derivatives 37,434 46,688
Income tax receivable - 1,422
Unrealized FX gains and losses of derivatives 110 -
37,544 48,110
The income tax receivable relates to recoverable income and withholding taxes.
9. Prepaid and deferred charges
31 Dec 2021 31 Dec 2020
EUR’000 EUR’000
Prepaid and deferred charges 21,689 15,322
21,689 15,322
H
The prepaid and deferred charges mainly consist of the capitalized bond discount. The bond discount
arises in the difference of principal amount and net proceed at issuance. The duration for amortization
is the term of the respective bond.
Volkswagen Financial Services N.V.
27
10. Cash at banks and in hand
31 Dec 2021 31 Dec 2020
EUR’000 EUR’000
Cash at Volkswagen Bank account 6,521 2,304
Cash at Commerzbank 5,517 556
12,038 2,860
H
All cash balances are at the free disposal of the Company and bear market interest rates.
In 2021, Moody’s rated Volkswagen Bank, with P-1 / A1 (short term / long term) with a stable outlook
while Standard & Poor’s rated Volkswagen Bank with A2 / BBB+ (short term / long term) also with a
stable outlook.
In 2021, Moody’s rated Commerzbank, with P-1 / A1 (short term / long term) while Standard & Poor’s
rated Commerzbank, with A-2 / A- (short term / long term).
11. Shareholder’s equity
Issued and
paid-up share
capital
Share
premium
reserve
Retained
earnings
Total equity
EUR’000 EUR’000 EUR’000 EUR’000
Balance as at 1 January 2020 454 1,115,000 149,779 1,265,233
Result for the year 2020 - - 10,172 10,172
454 17,775 18,229
Balance as at 31 December 2020 /
1 January 2021
454 1,115,000 159,951 1,275,405
Dividend distributed - - (159,000) (159,000)
Result for the year 2021 - - 9,729 9,729
Balance as at 31 December 2021 454 1,115,000 10,680 1,126,134
The shareholder’s equity consists of the following:
Share capital
On 31 December 2021, the authorized capital of the Company amounted to EUR 2.3 million, of which
an amount of EUR 454,000 was issued and paid-up, representing 454 registered and issued shares
of EUR 1,000 each. The Company has no mandatory statutory reserve.
Share premium reserve
There have been no changes to the share premium reserve during 2021.
Retained earnings
Volkswagen Financial Services N.V.
28
At the end of 2021, the total retained earnings amounted to EUR 10,68 million (2020: EUR 160
million) and the total equity amounted to EUR 1,13 billion (2020: EUR 1,3 billion).
12. Long-term liabilities
31 Dec 2021 31 Dec 2020
EUR’000 EUR’000
Bonds listed 5,371,421 5,087,921
5,371,421 5,087,921
The breakdown of the long-term bonds is as follows:
Original
currency
Weighted
average
effective
interest
rate (%)
31 December 2021
Book value Fair value
EUR’000 EUR’000
Maturity longer than 5 years
Bonds listed GBP 1.38 416,667 392,596
Maturity less than 5 years
Bonds listed EUR 0.12 150,000 151,024
Bonds listed GBP 1.94 4,017,857 4,042,192
Bonds listed NOK 2.61 180,191 182,616
Bonds listed SEK 0.65 341,305 342,357
Bonds listed CZK 1.71 40,227 37,518
Bonds listed JPY 0.20 225,174 231,926
Total long-term bonds
5,371,421 5,380,229
The market values for the bonds are based on the prices of the Stuttgart stock exchange. In case of
non-availability, the market values are determined on the basis of discounted cash flows. Credit
spreads were not included in the model used to determine the market value
The weighted average effective interest rate is calculated for the outstanding loans as per year end,
taking into account the duration in the current year.
Volkswagen Financial Services N.V.
29
For comparison purposes, the overview of long-term bonds as at 31 December 2020 is as follows:
Original
currency
Weighted
average
effective
interest
rate (%)
31 December 2020
Book value Fair value
EUR’000 EUR’000
Maturity longer than 5 years
Bonds listed - -
Maturity less than 5 years
Bonds listed EUR 1.35 520,000 524,800
Bonds listed GBP 1.82 3,947,734 4,039,006
Bonds listed NOK 2.30 320,926 360,958
Bonds listed SEK 0.52 299,261 347,603
Total long-term bonds
5,087,921 5,272,367
The bonds are issued under the existing EUR 35bn DIP Programme and rank pari passu with the
existing issuance.
Liabilities to Volkswagen Group companies excluding interest
A breakdown of the long-term liabilities to Volkswagen Group companies is as follows:
31 December 2021
Original
currency
Weighted
average
effective
interest
rate (%)
Book value
Fair value
EUR’000 EUR’000
Maturity less than 5 years
VWGoAF USD 1.33 713,348 738,475
Volkswagen International Estonia EUR 0.03 150,000 148,564
863,348 887,039
For comparison purposes, the overview of 2020 is as follows:
31 December 2020
Original
currency
Weighted
average
effective
interest
rate (%)
Book value
Fair value
EUR’000 EUR’000
Maturity less than 5 years
VWGoAF USD 0.13 1,133,908 1,102,910
Volkswagen Financial Services N.V.
30
Volkswagen International Belgium EUR 0.51 150,000 150,136
1,283,908 1,253,046
The movement of the borrowings and bonds (long and short-term) consists of the following:
31 Dec 2021 31 Dec 2020
EUR’000 EUR’000
Beginning of the period
8,342,063 6,317,184
Borrowings
3,437,184 3,248,598
Maturities
(3,218,690) (1,010,662)
Interest accrued to VW Group companies
1,700 1,782
Interest paid to VW Group companies
(1,782) (625)
FX difference on borrowings and bonds
363,675 (214,214)
End of the period
8,924,150 8,342,063
Long-term 6,234,769 6,371,829
Short-term 2,689,381 1,970,234
The credit ratings of the rating agencies are derived from FSAG’s rating:
2021
Agency Short-term Long term Outlook
Moody’s Prime-2 A3 stable
Standard & Poor’s A-2 BBB+ stable
2020
Agency Short-term Long term Outlook
Moody’s Prime-2 A3 Negative
Standard & Poor’s A-2 BBB+ Negative
Volkswagen Financial Services N.V.
31
13. Current liabilities
31 Dec 2021 31 Dec 2020
EUR’000 EUR’000
Bonds listed 2,014,122 1,406,507
2,014,122 1,406,507
The breakdown of the current bonds is as follows:
Original
currency
Weighted
average
effective
interest
rate (%)
31 Decembe
r
2021
Book value Fair value
EUR’000 EUR’000
Maturity less than 1 year
Bonds listed GBP 1.67 1,071,428 1,076,486
Bonds listed NOK 2.32 252,041 251,574
Bonds listed SEK 0.74 170,653 171,301
Bonds listed EUR 1.35 520,000 520,447
Total current bonds
2,014,122 2,019,808
For comparison purposes, the overview of current bonds as at 31 December 2020 is as follows:
Original
currency
Weighted
average
effective
interest
rate (%)
31 December 2020
Book value Fair value
EUR’000 EUR’000
Maturity less than 1 year
Bonds listed GBP 1.69 1,112,038 1,116,071
Bonds listed NOK 2.00 47,813 47,938
Bonds listed SEK 0.64 246,656 249,655
Total current bonds
1,406,507 1,413,664
Volkswagen Financial Services N.V.
32
Liabilities to Volkswagen Group companies
The breakdown of the current liabilities, including accrued interest to Volkswagen Group
companies is as follows:
Original
currency
Weighted
average
effective
interest
rate (%)
31 December 2021
Book value Fair value
EUR’000 EUR’000
FSAG EUR 0.00 103,000 103,023
Volkswagen International Belgium EUR 0.30 150,000 150,644
VWGoAF USD 0.98 420,559 441,091
Accrued interest EUR 1,700 1,700
675,259 696,458
For comparison purposes, the overview of current liabilities, including accrued interest to
Volkswagen Group companies as at 31 December 2020 is as follows:
Original
currency
Weighted
average
effective
interest
rate (%)
31 December 2020
Book value Fair value
EUR’000 EUR’000
FSAG EUR 0.06 381,930 383,969
Volkswagen International Belgium EUR 0.09 150,000 149,954
Accrued interest EUR 1,782 1,782
533,712 535,705
Volkswagen Financial Services N.V.
33
Commercial papers
A breakdown of the current liabilities from issued commercial paper as per 31 December 2021 is as
follows:
Original
currency
Weighted
average
effective
interest
rate (%)
31 December 2021
Book value Fair value
EUR’000 EUR’000
Average term 5 months
Commercial Papers EUR - - -
Total commercial papers
- -
For comparison the overview of 2020:
Original
currency
Average
interest
rate (%)
31 December 2020
Book value Fair value
EUR’000 EUR’000
Average term 5 months
Commercial Papers EUR (0.05) 30,015 30,005
Total commercial papers
30,015 30,005
14. Other liabilities
31 Dec 2021 31 Dec 2020
This account consists of the following:
EUR’000 EUR’000
Interest payables on bonds 54,079 53,421
Interest payables to banks arising from derivatives
14,837 13,937
Current income tax 252 -
Withholding tax payable 155 262
Accrued liabilities 274 854
69,597 68,474
Volkswagen Financial Services N.V.
34
15. Deferred income
31 Dec 2021 31 Dec 2020
EUR’000 EUR’000
Capitalised issue income 18,353 15,133
18,353 15,133
Capitalised issue income relates to received up-front payments from cross-currency interest rate
swaps, compensating the bond discount. The duration for amortization is the term of the regarding
swap and bond, see note 9.
16. Commitments not included in the balance sheet
The following revolving credit facilities are currently outstanding in 2021:
Borrower Currency Amount
in ’000
Effective
date
Termination date
SkoFIN s.r.o. CZK 4,000,000 03.09.2012 Open
OOOVolkswagen Group Finanz RUB 3,000,000 07.02.2015 Open
OOO VW Financial Services RUS RUB 8,000,000 07.02.2015 Open
For comparison, the overview of outstanding revolving credit facilities as at 31 December 2020:
Borrower Currency Amount
in ’000
Effective
date
Termination date
SkoFIN s.r.o. CZK 4,000,000 03.09.2012 Open
OOO Volkswagen Group Finanz RUB 3,000,000 07.02.2015 Open
OOO VW Financial Services RUS RUB 8,000,000 07.02.2015 Open
17. Financial income and expenses
2021 2020
EUR’000 EUR’000
Interest and similar income 194,624 149,888
Interest and similar expenses (179,731) (134,426)
14,893 15,462
The Interest and similar income includes the net exchange rate difference TEUR 802. The net
exchange rate difference in 2020 is included in Interest and similar expenses TEUR 173).
Volkswagen Financial Services N.V.
35
18. Other operating income
2021 2020
EUR’000 EUR’000
Miscellaneous income 189 136
189 136
The miscellaneous income relates to refunds by Volkswagen Digital Solutions for IT services
related to the previous period (TEUR 189).
19. Other operating expenses
2021 2020
EUR’000 EUR’000
Miscellaneous expenses 2 20
Bank charges 19 22
Deposit facility charges 28 -
49 42
20. General and administrative expenses
2021 2020
EUR’000 EUR’000
Personnel and other third party costs 1,350 1,200
Auditors fees 71 85
Information technology expenses 425 448
Group treasury deal processing fee 220 217
General office expenses 160 154
Directors’ and Officers’ liability insurance 7 4
2,233 2,108
The personnel and other third party costs is a charge from VIF for services rendered to FSNV. Due
to a re-negotiation of the Service Level Agreement in January 2015, the amount charged for these
services will fluctuate on a year-to-year basis. The remuneration of the members of Management
Board in 2021 was approximately EUR 231,000 (2020: EUR 217,000) and is included in the
personnel and other third party costs from VIF.
Volkswagen Financial Services N.V.
36
21. Independent auditor’s fees
The following fees based on invoices and estimated work orders for assurance services incurred in
the reporting year:
2021 2020
EUR’000 EUR’000
Audit of the financial statements 36 36
Audit-related fees 35 7
71 43
The audit of the statutory accounts in 2021 and 2020 was performed by Ernst & Young Accountants
LLP.
The audit-related fees in 2021 were services on consent letters issued by Ernst & Young Accountants
LLP and BDO Audit & Assurance B.V. The audit-related fees in 2020 are related to services on
consent letters issued by BDO Audit & Assurance B.V. only.
Neither tax services nor other non-audit services were rendered by Ernst & Young Accountants LLP.
22. Average number of employees
The employees are supplied by VIF. The costs regarding the work performed for FSNV are included
in the service charges of EUR 1,35 million, which are included in the general and administrative
expenses.
Volkswagen Financial Services N.V.
37
23. Financial instruments
The company uses derivatives to manage interest and FX exposures that arise as result of
mismatches between the loans issued in the capital markets and loans issued to VWAG Group
companies and affiliated. On this basis the fair value changes in derivatives are primarily driven by
changes in the applicable currencies and related interest curves. The main currencies and interest
zones applicabe are GBP and USD as well as NOK, SEK, USD, PLN, KRW, TRY and JPY.
The company applies hedge accounting for all derivatives except for short-term FX forwards relating
to interest positions. The current hedges are all 100% effective during the year.
The financial instruments of the Company had the following notional amounts:
Up to 1 year 1 to 5 years More than 5
years
Total
EUR’000 EUR’000 EUR’000 EUR’000
31 December 2021
Interest rate swaps 984,413 2,581,005 416,667 3,982,085
Cross currency Interest rate swaps 1,317,331 1,124,508 - 2,441,839
Foreign exchange contracts 392,091 6,025 - 398,116
Total notional amounts 2,693,835 3,711,538 416,667 6,822,040
31 December 2020
Interest rate swaps 1,309,851 2,878,040 - 4,187,891
Cross currency Interest rate swaps 520,881 1,867,064 - 2,387,945
Foreign exchange contracts 964,653 5,267 - 969,920
Total notional amounts 2,795,385 4,750,371 - 7,545,756
The financial instruments of the Company had the following positive or negative fair values.
The values are shown as Dirty Prices, i.e. including accrued interest.
Interest rate
swaps
Cross
currency
Interest rate
swaps
Foreign
exchange
contracts
Total
EUR’000 EUR’000 EUR’000 EUR’000
31 December 2021
Positive fair value 10,912 13,307 274 24,493
Negative fair value (50,498) (76,346) (11,143) (137,987)
Total market value (39,586) (63,039) (10,869) (113,494)
31 December 2020
Positive fair value 85,034 49,502 13,026 147,562
Negative fair value - (39,453) (12,527) (51,981)
Total fair value 85,034 10,049 499 95,581
Volkswagen Financial Services N.V.
38
24. Taxation
The taxation on the result on ordinary activities can be specified as follows:
2021 2020
EUR’000 EUR’000
Result before taxation 12,800 13,448
Taxation on result 3,071 3,276
Effective tax rate 24.0% 24.4%
Applicable tax rate 25.0% 25.0%
The difference between the effective and applicable tax rate is caused by withholding taxes from
previous years.
25. Profit distribution
Management proposes to retain the 2021 profit of EUR 9.728.735,79.
26. Post balance sheet events
Russia-Ukraine conflict
At the time of preparing this report, there is a risk that the latest developments in the Russia-Ukraine
conflict will have a negative impact on the Volkswagen Group’s business. This may also result from
bottlenecks in the supply chain. At the present time, it is not yet possible to conclusively assess the
specific effects. Nor it is possible at this stage to predict with sufficient certainty to what extent further
escalation of the Russia-Ukraine conflict will impact on the global economy and growth in the industry
in fiscal year 2022.
The Volkswagen Group does not have any material subsidiaries and equity instruments in Ukraine.
In Russia, the Volkswagen Group has in particular the production company at the Kaluga site, as
well as sales units and financing companies. These companies could be adversely affected by the
sanctions already resolved, and also by new sanctions and general developments in Russia. In
relation to the net assets, financial positions and result of operations of the Volkswagen Group, the
business activities of the Volkswagen Group in these two countries are insignificant.
FSNV has no direct business relation with entities in Ukraine. Credit facilties are granted to
OOO Volkswagen Group Finanz, Moscow and OOO Volkswagen Financial Services RUS, Moscow.
- both undrawn. The entities are funded mainly on the local capital and financial markets.
Therefore the impact of this conflict for FSNV can only be indirect due to corporate integration within
the Volkswagen Group
Volkswagen Financial Services N.V.
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27. Going Goncern
The Managing Director has made an assessment of the Company’s ability to continue as a going
concern and is satisfied that the Company has the resources and activities to continue in business
for the foreseeable future. Furthermore, the Managing Director is not aware of any material
uncertainties that may cast significant doubt upon the Company’s ability to continue as a going
concern. Therefore, the financial statements continue to be prepared on the going concern basis.
Whilst the worldwide outbreak of the COVID-19 virus generally increases a number of the risk factors,
no direct impact on the company’s operations can be observed, as the Company has a sound
financial position (with equity reserves in place) and committed loan agreements which is expected
to keep the Company in a profitable position for the foreseeable future
28. Members of Management Board and Supervisory Board
Management Board:
Chris Norrod, Amsterdam (since 1 August 2021)
Inez de Rijk, Amsterdam (1 July to 31 July 2021)
Thomas Fries, Amsterdam (until 12 June 2020)
The member of the Management Board located in Amsterdam received a remuneration for 2021 in
his capacity as Director of the Company of approximately EUR 240,000 (2020: 217,000) by
Volkswagen International Finance N.V., see note 20.
Supervisory Board:
Frank Fiedler, Braunschweig (Chairman)
Bernd Bode, Hannover (until 1 June 2021)
Roman Rosenberg, Magdeburg (since 28 June 2021)
The members of the Supervisory Board receive a fixed fee for all their supervisory board mandates
within the Volkswagen Group from FSAG.
Amsterdam, 22 March 2022
Management Board, Supervisory Board,
Original has been signed by Original has been signed by
C. Norrod F. Fiedler
Original has been signed by
R. Rosenberg
Volkswagen Financial Services N.V.
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Other information
Profit appropriation according to the Articles of Association
The Company’s Articles of Association provide that appropriation of accrued profit is subject to the
decision of the shareholders at the general meeting of shareholders. The Company can only make
distributions to the shareholders and other persons entitled up to an amount, which does not exceed
the amount of the distributable reserves. The general meeting may resolve to pay dividends from
legally distributable reserves.
Independent auditor’s report
To: the shareholders and supervisory board of Volkswagen Financial Services N.V.
Report on the audit of the financial statements 2021
included in the financial report
Our opinion
We have audited the financial statements 2021 of Volkswagen Financial Services N.V. based in
Amsterdam.
In our opinion the accompanying financial statements give a true and fair view of the financial position of
Volkswagen Financial Services N.V. as at 31 December 2021, and of its result and its cash flows for year
ended 31 December 2021 in accordance with Part 9 of Book 2 of the Dutch Civil Code.
The financial statements comprise:
• The balance sheet as at 31 December 2021
• The income statement for the year ended 31 December 2021
• The notes comprising a summary of the accounting policies and other explanatory information
Basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing.
Our responsibilities under those standards are further described in the Our responsibilities for the audit
of the financial statements section of our report.
We are independent of Volkswagen Financial Services N.V. in accordance with the EU Regulation on
specific requirements regarding statutory audit of public-interest entities, the “Wet toezicht
accountantsorganisaties” (Wta, Audit firms supervision act), the “Verordening inzake de
onafhankelijkheid van accountants bij assurance-opdrachten” (ViO, Code of Ethics for Professional
Accountants, a regulation with respect to independence) and other relevant independence regulations in
the Netherlands. Furthermore, we have complied with the “Verordening gedrags- en beroepsregels
accountants” (VGBA, Dutch Code of Ethics).
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Information in support of our opinion
We designed our audit procedures in the context of our audit of the financial statements as a whole and
in forming our opinion thereon. The following information in support of our opinion and any findings
were addressed in this context, and we do not provide a separate opinion or conclusion on these matters.
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Our understanding of the business
Volkswagen Financial Services N.V. is a 100% subsidiary of Volkswagen Finance Overseas BV, who in turn
is a 100% subsidiary of Financial Services AG (FSAG). The ultimate parent company is Volkswagen AG
(VWAG). The main purpose of the Company is the financing of and participation in VWAG Group
companies. The Company has access to several funding sources such as bonds and commercial paper, as
well as inter-company loans. All external issuances of financial instruments are guaranteed by FSAG in
case the Company does not meet its obligations towards the holders of these instruments. The Company
has lent more than 95% of the proceeds of these borrowings to VWAG group companies and its affiliates.
We start by determining materiality and identifying and assessing the risks of material misstatement of
the financial statements, whether due to fraud or error in order to design audit procedures responsive to
those risks and to obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.
Materiality
Materiality
€81 million (2020: €77 million)
Benchmark applied
0.8% of total assets
Explanation
We have used total assets as a benchmark as we believe that this
benchmark is the most appropriate metric for the financial position of
the Company. In our opinion, the holders of the debt issued by the
Company are most interested in the receivables of the loans issued to
related parties, which is best represented by total assets.
We have also taken into account misstatements and/or possible misstatements that in our opinion are
material for the users of the financial statements for qualitative reasons.
We agreed with the supervisory board that misstatements in excess of €4.1 million, which are identified
during the audit, would be reported to them, as well as smaller misstatements that in our view must be
reported on qualitative grounds.
Teaming
We ensured that the audit team included the appropriate skills and competences which are needed for
the audit of a listed client in the automotive and financial services industry.
Our focus on fraud and non-compliance with laws and
regulations
Our responsibility
Although we are not responsible for preventing fraud or non-compliance and we cannot be expected to
detect non-compliance with all laws and regulations, it is our responsibility to obtain reasonable
assurance that the financial statements, taken as a whole, are free from material misstatement, whether
caused by fraud or error.
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Our audit response related to fraud risks
We identify and assess the risks of material misstatements of the financial statements due to fraud.
During our audit we obtained an understanding of Volkswagen Financial Services N.V. and its
environment and the components of the system of internal control, including the risk assessment process
and management’s process for responding to the risks of fraud and monitoring the system of internal
control and how the supervisory board exercises oversight, as well as the outcomes.
We evaluated the design and relevant aspects of the system of internal control and in particular the fraud
risk assessment, as well as the code of conduct, whistle blower procedures and incident registration. We
evaluated the design and the implementation and, where considered appropriate, tested the operating
effectiveness, of internal controls designed to mitigate fraud risks.
As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to financial
reporting fraud, misappropriation of assets and bribery and corruption. We evaluated whether these
factors indicate that a risk of material misstatement due to fraud is present.
We incorporated elements of unpredictability in our audit. We also considered the outcome of our other
audit procedures and evaluated whether any findings were indicative of fraud or non-compliance.
As in all of our audits, we addressed the risks related to management override of controls. These risks
did however not require significant auditor’s attention during our audit.
We identified a risk on fraud as part of our risk assessment related to the existence of the loan. This has
been further explained below in our key audit matter paragraph.
Our audit response related to risks of non-compliance with laws and regulations
We assessed factors related to the risks of non-compliance with laws and regulations that could
reasonably be expected to have a material effect on the financial statements from our general industry
experience, through discussions with the management board, reading minutes, inspection of internal
audit and compliance reports and performing substantive tests of details of classes of transactions,
account balances or disclosures. We also inspected lawyers’ letters and correspondence with regulatory
authorities and remained alert to any indication of (suspected) non-compliance throughout the audit.
Our audit response related to going concern
As disclosed in section “Going concern” in Note 27 to the financial statements, management made a
specific assessment of the company’s ability to continue as a going concern and to continue its
operations for at least the next 12 months.
We discussed and evaluated the specific assessment with management exercising professional judgment
and maintaining professional skepticism.
We considered whether management’s going concern assessment, based on our knowledge and
understanding obtained through our audit of the financial statements or otherwise, contains all events or
conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our
opinion.
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Based on our procedures performed, we did not identify serious doubts on the Company’s ability to
continue as a going concern for the next twelve months.
Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause a Company to cease to continue as a going concern.
Our key audit matter
Key audit matters are those matters that, in our professional judgment, were of most s ignificance in our
audit of the financial statements. We have communicated the key audit matters to the supervisory board.
The key audit matters are not a comprehensive reflection of all matters discussed. In comparison with
previous year, our key audit matter has become more concentrated on the existence of the loans issued
to related parties. Which is deemed the area with the highest potential impact on the financial
statements.
Existence of the loans issued to related parties
Note 5 and Note 6
Risk
Volkswagen Financial Services N.V is a financing entity entering into financing
agreements with Volkswagen AG group companies and its affiliates. Volkswagen
Financial Services N.V has no significant assets other than loans and interest
receivable from Volkswagen AG group companies and its affiliates to meet its
financial obligations. We consider the existence of the loans receivable a key audit
matter due to the size of the loans in relation to the financial statements as a whole
and the loan portfolio balance of the Company being the main Key Performance
Indicator of the financial statements for the Company’s bond holders.
Our audit
approach
We have applied mainly substantive audit procedures on the balances of loans issued
to related parties. These procedures included, amongst others:
• Obtaining an understanding of the process for entering into loans with related
parties
• Inspecting loan agreements for the loans issued to the related parties
• Obtaining loan confirmations to verify the existence of the loans issued to related
parties
• Evaluating the appropriateness of accounting policies applied related to
recognition of loans issued to related parties.
In addition to the steps above we assessed the adequacy of the disclosures which are
included in note 5 and note 6 to the financial statements.
Key
observations
Based on the results of our work, we did not identify evidence of material
misstatement in the existence of loans issued to related parties. We concur with the
related disclosures in the financial statements.
Report on other information included in the financial
report
In addition to the financial statements and our auditor’s report thereon, the financial report contains
other information as required by Part 9 of Book 2 of the Dutch Civil Code.
44
Based on the following procedures performed, we conclude that the other information:
• Is consistent with the financial statements and does not contain material misstatements
• Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code for the management
board report and the other information as required by Part 9 of Book 2 of the Dutch Civil Code.
We have read the other information. Based on our knowledge and understanding obtained through our
audit of the financial statements or otherwise, we have considered whether the other information
contains material misstatements. By performing these procedures, we comply with the requirements of
Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures
performed is substantially less than the scope of those performed in our audit of the financial
statements.
Management is responsible for the preparation of the other information, including the Management
Board Report in accordance with Part 9 of Book 2 of the Dutch Civil Code, other information required by
Part 9 of Book 2 of the Dutch Civil Code.
Report on other legal and regulatory requirements and ESEF
Engagement
We were engaged by supervisory board as auditor of Volkswagen Financial Services N.V. on 16 November
2020, as of the audit for the year 2020 and have operated as statutory auditor ever since that date.
No prohibited non-audit services
We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on
specific requirements regarding statutory audit of public-interest entities.
European Single Electronic Reporting Format (ESEF)
Volkswagen Financial Services N.V. has prepared the financial report in ESEF. The requirements for this
are set out in the Delegated Regulation (EU) 2019/815 with regard to regulatory technical standards on
the specification of a single electronic reporting format (hereinafter: the RTS on ESEF).
In our opinion, the financial report, including the financial statements, prepared in the XHTML format by
Volkswagen Financial Services N.V., complies in all material respects with the RTS on ESEF.
Management is responsible for preparing the financial report, including the financial statements, in
accordance with the RTS on ESEF.
Our responsibility is to obtain reasonable assurance for our opinion whether the financial report complies
with the RTS on ESEF.
Our procedures, taking into account Alert 43 of the NBA (the Netherlands Institute of Chartered
Accountants), included amongst others:
• Obtaining an understanding of the Volkswagen Financial Services N.V.’s financial reporting process,
including the financial report in XHTML format
• Obtaining the financial report in XHTML format and performing validations to determine whether the
financial report in XHTML format has been prepared in accordance with the technical specifications as
included in the RTS on ESEF
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Description of responsibilities regarding the financial
statements
Responsibilities of management and the supervisory board for the financial statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with Part 9 of Book 2 of the Dutch Civil Code. Furthermore, management is responsible for
such internal control as management determines is necessary to enable the preparation of the financial
statements that are free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, management is responsible for assessing the
company’s ability to continue as a going concern. Based on the financial reporting framework mentioned,
management should prepare the financial statements using the going concern basis of accounting unless
management either intends to liquidate the company or to cease operations, or has no realistic
alternative but to do so. Management should disclose events and circumstances that may cast significant
doubt on the company’s ability to continue as a going concern in the financial statements.
The supervisory board is responsible for overseeing the company’s financial reporting process.
Our responsibilities for the audit of the financial statements
Our objective is to plan and perform the audit engagement in a manner that allows us to obtain sufficient
and appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we may not
detect all material errors and fraud during our audit.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements. The materiality affects the nature, timing and extent of our audit
procedures and the evaluation of the effect of identified misstatements on our opinion.
We have exercised professional judgment and have maintained professional skepticism throughout the
audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence
requirements. The “Information in support of our opinion” section above includes an informative
summary of our responsibilities and the work performed as the basis for our opinion.
Our audit included among others:
• Performing audit procedures responsive to the risks identified, and obtaining audit evidence that is
sufficient and appropriate to provide a basis for our opinion
• Obtaining an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control
• Evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management
• Evaluating the overall presentation, structure and content of the financial statements, including the
disclosures
• Evaluating whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation
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Communication
We communicate with the supervisory board regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant findings in internal control that
we identify during our audit.
In this respect we also submit an additional report to the audit committee in accordance with Article 11
of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. The
information included in this additional report is consistent with our audit opinion in this auditor’s report.
We provide the supervisory board with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the supervisory board, we determine the key audit matters:
those matters that were of most significance in the audit of the financial statements. We describe these
matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, not communicating the matter is in the public interest.
Amsterdam, 22 March 2022
Ernst & Young Accountants LLP
signed by M.L. Milet de St Aubin
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