15. Relationship with Former Parent and Related Entities

Historically, Veoneer has been managed and operated in the normal course of business with other affiliates of Autoliv. Accordingly, certain shared costs have been allocated to Veoneer and reflected as expenses in the stand-alone Unaudited Condensed Consolidated Financial Statements. Management of Autoliv and Veoneer consider the allocation methodologies used to be reasonable and appropriate reflections of historical expenses of Autoliv attributable to Veoneer for purposes of the stand-alone Financial Statements; however, the expenses reflected in the Unaudited Condensed Consolidated Financial Statements may not be indicative of the actual expenses that would have been incurred during the periods presented if Veoneer historically operated as a separate, stand-alone entity. In addition, the expenses reflected in the Unaudited Condensed Consolidated Financial Statements may not be indicative of expenses that will be incurred in the future by Veoneer.

Prior to the Spin-Off, transactions between Autoliv and Veoneer, with the exception of sales and purchase transactions and reimbursements for payments made to third-party service providers by Autoliv on Veoneer’s behalf, are reflected in equity in the Condensed Consolidated Balance Sheets as Net Former Parent investment and in the Unaudited Condensed Consolidated Statements of Cash Flows as a financing activity in Net transfers from Former Parent.

Transaction with other Autoliv Businesses

Throughout the periods covered by the Unaudited Condensed Consolidated Financial Statements, Veoneer sold finished goods to Autoliv. Related party sales to other Autoliv businesses amount to $21 million and $43 million for the three and six months ended June 30, 2018, respectively, and $18 million and $35 million for the three and six months ended June 30, 2017, respectively.

Related Party Balances

Amounts due to and due from related parties are summarized in the below table:

	As of
RELATED PARTY	June 30, 2018		December 31, 2017
Related party receivable	$	71	$	-
Related party notes receivable		-		76
Related party payables		47		5
Related party long-term debt		13		62

Related party receivables are mainly driven by Reseller Agreements put in place in connection with the Spin-Off. The Reseller Agreements are between Autoliv and Veoneer to facilitate the temporary arrangement of the sale of Veoneer products manufactured for certain customers for a limited period post Spin-Off. Autoliv will collect the customer payments and will remit the payments to Veoneer.

As of December 31, 2017, related party notes receivables relate to a long term loan between Veoneer and Autoliv entities, which was subsequently settled prior to the Spin-Off.

As of June 30, 2018, the related party payables mainly relate to an agreement between Veoneer-Nissin Brake Systems and various Autoliv companies.

A portion of the related party long-term debt is subject to a long term loan agreement that was settled on June 29, 2018. As of June 30, 2018, all related party debt agreements were settled or terminated, with the exception of a capital lease arrangement at Veoneer Nissin Brake Systems (a 51% owned subsidiary) of $13 million and $11 million as of June 30, 2018 and December 31, 2017, respectively. The capital lease is with Nissin Kogyo, the 49% owner of Veoneer Nissin Brake Systems.

Corporate Costs/Allocations

For the periods prior to April 1, 2018, the Unaudited Condensed Combined Financial Statements include corporate costs incurred by Autoliv for services that are provided to or on behalf of Veoneer. These costs consist of allocated cost pools and direct costs. Corporate costs have been directly charged to, or allocated to, Veoneer using methods management believes are consistent and reasonable. The method for allocating corporate function costs to Veoneer is based on various formulas involving allocation factors. The methods for allocating corporate administration costs to Veoneer are based on revenue, headcount, or other relevant metrics. However, the expenses reflected in the Unaudited Condensed Consolidated Financial Statements may not be indicative of the actual expenses that would have been incurred during the periods presented if Veoneer historically operated as a separate, stand-alone entity. All corporate charges and allocations have been deemed paid by Veoneer to Autoliv in the period in which the cost was recorded in the Unaudited Condensed Consolidated Statements of Operations. Effective April 1, 2018, Veoneer began performing certain functions using internal resources or third parties, and certain services continued to be provided by Autoliv and directly charged to Veoneer. In addition, Veoneer personnel perform certain services for Autoliv, which is directly charged to Autoliv.

Allocated corporate costs included in Costs of sales, Selling, general and administrative expenses and Research, development and engineering expenses were for shared services and infrastructure provided, which includes costs such as information technology, accounting, legal, real estate and facilities, corporate advertising, risk and insurance services, treasury, shareholder services and other corporate and infrastructure services.

Cash Management and Financing

Prior to the Spin-Off, Veoneer participated in Autoliv’s centralized cash management and financing programs. Disbursements were made through centralized accounts payable systems, which are operated by Autoliv. Cash receipts are transferred to centralized accounts, also maintained by Autoliv. As cash was disbursed and received by Autoliv, it was accounted for by Veoneer through the Net Former Parent investment. All short-term and long-term debt was financed by Autoliv or by Nissin Kogyo and financing decisions for wholly and majority owned subsidiaries were determined by Autoliv’s corporate treasury operations. On the Distribution Date, Veoneer held approximately $1 billion of cash and cash equivalents. Upon Spin-Off, Veoneer created its own corporate treasury operations.