BMW 2005 Annual Report Download - page 103

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43 million (2004: euro 29 million) and is measured,
similar to pension obligations, in accordance with
IAS 19. In the case of post-employment medical care,
it is assumed that the costs will increase on a long-
term basis by 6% p.a. (2004: 7%). The expense for
medical care costs in the financial year 2005 amounted
to euro 8 million (2004: euro 5 million).
Post-employment benefit plans are classified as
either defined contribution or defined benefit plans.
Under defined contribution plans, an enterprise pays
fixed contributions into a separate entity or fund and
does not assume any other obligations. The total
pension expense for all defined contribution plans
of the BMW Group amounted to euro 400 million
(2004: euro 383 million).This includes employer con-
tributions paid to state pension insurance schemes
amounting to euro 381million (2004:euro 369million).
Under defined benefit plans, the enterprise is
required to pay the benefits granted to present and
past employees. Defined benefit plans may be funded
or unfunded, the latter sometimes financed by means
of accounting provisions. Most of the pension com-
mitments of the BMW Group in Germany relate to
BMW AG, whose pension plans, like all those of all of
the BMW Group’s German subsidiaries, are unfunded
and financed by means of accounting provisions. In
addition, a deferred remuneration retirement scheme
is in place which is funded by employee contribu-
tions. The main funded plans of the BMW Group are
in the United Kingdom, the USA, Switzerland, the
Netherlands, Belgium and Japan.
Pension obligations are computed on an actu-
arial basis at the level of the defined benefit obliga-
tion.This computation requires the use of estimates.
The main assumptions, in addition to life expectan-
cy, depend on the economic situation in each partic-
ular country. The following weighted average values
are used in the United Kingdom (UK) and in the other
countries:
The salary level trend refers to the expected
rate of salary increase which is estimated annually
depending on inflation and the period of service of
employees with the Group.
In the case of funded plans, the defined benefit
obligation is offset against plan assets measured
at their fair value. Where the plan assets exceed the
pension obligations and the enterprise has a right
of reimbursement or a right to reduce future contri-
butions, the surplus amount is recognised in accor-
dance with IAS 19 as an asset under miscellaneous
assets. A liability is recognised under pension pro-
visions in the case of funded plans where the pen-
sion expense exceeds the contributions paid to the
fund.
Actuarial gains or losses may result from in-
creases or decreases in either the present value of
the defined benefit obligation or in the fair value of
the plan assets. Causes of actuarial gains or losses
include the effect of changes in the measurement
in % Germany UK Other
31 December 2005 2004 2005 2004 2005 2004
Discount rate 4.25 4.75 4.72 5.25 5.28 5.31
Salary level trend 3.25 3.25 3.86 3.86 2.62 3.16
Pension level trend 1.75 1.75 2.83 2.74 1.89 1.67
Group Financial Statements 62
Income Statements 63
Balance Sheets 64
Cash Flow Statements 66
Group Statement of
Changes in Equity 68
Statement of Income and Expenses
recognised directly in Equity 69
Notes 70
--Accounting Principles
and Policies 70
--Notes to the Income Statement 81
--Notes to the balance sheet 90
--Other Disclosures 114
--Segment Information 121
Auditors’ Report 125