BMW 2002 Annual Report Download - page 66

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measured applying normal measurement methods
on the basis of market information available at the
reporting date. Financial assets which are held to
maturity are measured at amortised cost or their
impaired value if applicable. Purchases and sales of
financial assets are accounted for on the basis of the
settlement date.
In the case of non-current financial assets, an
assessment is made on a regular basis in accor-
dance with IAS 39 whether there is any objective
evidence that a financial asset or group of assets
may be impaired. An impairment loss is recognised
if any such evidence exists. If a loss was previously
recognised directly in equity, the accumulated net
loss is removed from equity and recognised in net
profit.
Inventories of raw materials, supplies and
goods for resale are shown as a general rule at the
lower of average acquisition cost and net realisable
value. In some locations, the FIFO method (first-in
first-out) is applied.
Work in progress and finished goods are stated
at manufacturing cost, comprising all costs which
are directly attributable to the manufacturing process
and an appropriate proportion of production-related
overheads. These include production-related depre-
ciation and an appropriate proportion of administra-
tive and social costs.
Financing costs are not included in acquisition
or manufacturing costs.
Write-downs are made to cover risks arising from
slow-moving items or obsolescence. Lower values
are applied at the balance sheet date to reflect the
net realisable value where appropriate.
Receivables and other current assets are
stated at their nominal value or at cost, less appropri-
ate allowances for identifiable risks. Receivables with
maturities of over one year which bear no or lower
than market interest rate are discounted. An allow-
ance based on past experience is recognised to take
account of general credit risk.
Receivables from sales financing comprise re-
ceivables from customer, dealer and lease financing.
Derivative financial instruments are only
used within the BMW Group for hedging purposes in
order to reduce the currency, interest rate and mar-
ket price risks from operating activities and related
financing requirements. All derivative financial instru-
ments (such as interest, currency and combined
interest/currency swaps as well as forward currency
contracts) are measured in accordance with IAS 39
at fair value, irrespective of the purpose of or the
reason for entering into such instruments. In those
cases where hedge accounting is applied, changes
in fair value are recognised either in income or di-
rectly in equity under accumulated other equity, de-
pending on whether the transactions are classified
as fair value hedges or cash flow hedges. In the case
of fair value hedges, the results of the fair value
measurement of derivative financial instruments and
the related hedged items are recognised in the in-
come statement. In the case of fair value changes
from cash flow hedges which are used to mitigate
the future cash flow risk on a recognised asset or
liability or on forecasted transactions, the portion of
the unrealised gains and losses on the hedging in-
strument that is determined to be an effective hedge
is recognised initially directly in accumulated other
equity. Any such gains or losses are recognised sub-
sequently in the income statement when the hedged
item is recognised in the income statement.The
ineffective portion of the gains or losses from the fair