BMW 2003 Annual Report Download - page 62

The consolidated financial statements of BMW AG
(“BMW Group financial statements” or “Group finan-
cial statements”) at 31 December 2003 have been
drawn up in accordance with International Financial
Reporting Standards (IFRSs) issued by the Interna-
tional Accounting Standards Board (IASB), London
and valid at the balance sheet date. The designation
“IFRSs” also includes all valid International Account-
ing Standards (IASs). All interpretations of the Inter-
national Financial Reporting Interpretations Com-
mittee (IFRIC), formerly the Standing Interpretations
Committee (SIC), which are mandatory for the finan-
cial year 2003, were also applied.
The BMW Group and sub-group income state-
ments and balance sheets correspond to the classi-
fication provisions contained in §298 (in conjunction
with §266 and §275) of the German Commercial
Code (HGB), whereby the income statements are
presented using the cost of sales format. In order to
improve clarity, certain items are aggregated in the
income statement and balance sheet. These items
are disclosed and analysed separately in the Notes.
In order to support the sale of BMW products,
the BMW Group provides various financial services –
mainly loan and lease financing – to its customers.
The inclusion of the financial services activities of
the Group therefore has an impact on the Group
financial statements. In order to provide a better in-
sight into the assets, liabilities, financial position and
performance of the Group, additional information
has been presented in the BMW Group financial
statements on the industrial and the financial opera-
tions. Financial operations include financial services
and the activities of the Group financing companies.
The operating interest income and expense of
financial operations are included in revenues and
cost of sales respectively. The holding companies
BMW (UK) Holdings Ltd., Bracknell, BMW Holding
B.V., The Hague, BMW Österreich Holding GmbH,
Steyr, and BMW (US) Holding Corp., Wilmington,
Del., are allocated to industrial operations. The main
business transactions between the industrial and
financial operations, which are eliminated in the
Group financial statements, are internal sales of
products,the provision of funds for Group companies
and the related interest. These additional disclosures
allow the assets, liabilities, financial position and per-
formance of the industrial and financial operations
to be presented, in accordance with the recognition
and measurement principles stipulated by IFRSs, as
if they were two separate groups. This information,
which has not been audited by the Group auditors,
is provided on a voluntary basis.
In conjunction with the refinancing of financial
services business, a significant volume of receiv-
ables arising from customer and dealer financing are
sold. Similarly rights and obligations relating to leases
are sold.The sale of receivables is a well established
instrument used by industrial and financial com-
panies. These transactions are usually in the form
of so-called “asset backed financing” transactions.
This involves the sale of a portfolio of receivables to
a trust which, in turn, issues marketable securities
to refinance the purchase price. The BMW Group
continues to “service” the receivables (including
debt collection) and receives an appropriate fee for
these services. In accordance with IAS 27 (Consoli-
dated Financial Statements and Accounting for
Investments in Subsidiaries) and the interpretation
in SIC 12 (Consolidation – Special Purpose Entities),
such assets remain in the Group financial state-
ments although they have been legally sold. Gains
and losses relating to the sale of such assets are not
recognised until the assets are removed from the
Group balance sheet. The balance sheet value of
the assets sold at 31 December 2003 totalled euro
5.0 billion (31.12.2002: euro 4.5 billion). For an addi-
tional understanding of the asset, liability and finan-
cial position of the BMW Group, the Group balance
sheet contains a supplementary disclosure of the
balance sheet total adjusted for assets which have
been sold.
BMW Group
Notes to the Group Financial Statements
Accounting principles and policies
[1]Basis of preparation
61