BMW 2002 Annual Report Download - page 62

61
Iberica S.L., Madrid. In Mexico, the financing
busi-
ness of the sales company BMW de Mexico, S.A.
de C.V., Mexico City, was transferred to the newly
incorporated company BMW Financial Services
de Mexico S.A. de C.V., Mexico City. These two
new companies have also been consolidated in the
BMW Group financial statements.
In addition, eight financing companies were
consolidated for the first time.
BMW Servici Logistici s.r.l., Milan, was merged
with BMW Italia S.p.A., Milan. In addition, softlab
The equity of subsidiaries is consolidated using
the purchase method, whereby investments in sub-
sidiaries are set off against the Groups share of the
equity of consolidated subsidiaries at the date of
acquisition ( IAS 22: Business Combinations). Any
difference between purchase cost and the Groups
share of the equity is allocated, on the basis of the
groups shareholding, to the identifiable assets and
liabilities of the subsidiary when it results from previ-
ously undisclosed reserves or liabilities. Any excess
of cost over the amounts allocated to identifiable
assets and liabilities is recognised as goodwill and
is amortised over its future estimated useful life (up
toamaximum of 15 years) on a straight-line basis.
Amortisation is recognised as
an expense. Goodwill
of euro 91 million which arose prior to 1 January
1995 remains written off against reserves as per-
mitted by IAS 22. When a Group company is de-
consolidated, goodwill is removed from the balance
sheet with income statement effect.
The financial statements of consolidated companies
prepared in a foreign currency are translated
using the functional currency concept ( IAS 21:
The Effects of Changes in Foreign Exchange Ra tes)
and the foreign entity method. Since foreign sub-
sidiaries operate their businesses autonomously
Japan Corp., Tokyo, and softlab S.A., Madrid, were
sold and are therefore no longer group companies.
The group reporting entity also changed by the
first-time consolidation of five special investment
funds and four trusts and the deconsolidation of two
trusts.
All changes in the composition of the Group
do not have a material impact on the assets, liabilities,
financial position and earnings of the Group.
Receivables, liabilities, provisions, income and
expenses and profits between consolidated com-
panies (inter-group profits) are eliminated on con-
solidation.
Investments in other companies are accounted
for using the equity method, when significant in-
fluence can be exercised ( IAS 28: Accounting for
Investments in Associates). This is normally the
case when voting rights of between 20% and 50%
are held (associated companies). Under the equity
method, investments are measured at the groups
share of equity taking account of fair value adjust-
ments on acquisition, based on the groups share-
holding. Any difference between the cost of invest-
ment and the groups share of equity is accounted
for in accordance with the purchase method. All
other investments in other companies are measured
at amortised cost.
Consolidation principles are unchanged from
the previous year.
from a financial, economical and organisational
point of view, the functional currency of these com-
panies is identical to the local currency. Income and
expenses of foreign subsidiaries are therefore trans-
lated in the Group financial statements at the average
exchange rate for the year, and assets and liabilities
[4]Consolidation
principles
[5]Foreign currency
translation