BMW 2005 Annual Report Download - page 122

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Description of business segments
In accordance with the rules contained in IAS 14
(Segment Reporting), the BMW Group presents
segment information using business segments
as its primary reporting format and geographical
segments as its secondary reporting format. This
distinction is based on internal management and
financial reporting systems and reflects the risk and
earnings structure of the Group.
The activities of the BMW Group are broken
down into the segments Automobiles, Motorcycles
and Financial Services.
The Automobiles segment develops, manufac-
tures, assembles and sells cars and off-road vehi-
cles, under the brands BMW, MINI and Rolls-Royce
as well as spare parts and accessories.
BMW and MINI brand products are sold in Ger-
many through branches of BMW AG and by inde-
pendent, authorised dealers. Sales outside Germany
are handled primarily by subsidiary companies and,
in a number of markets, by independent import com-
panies. Rolls-Royce brand vehicles are sold in the
USA via a subsidiary company and elsewhere by in-
dependent, authorised dealers.
The BMW Motorcycles segment develops,
manufactures, assembles and sells BMW brand
motorcycles as well as spare parts and accessories.
The Financial Services segment focuses prima-
rily on leasing automobiles, providing loan finance
for retail customers and dealers, accepting customer
deposits and insurance activities. The profit before
financial result of this segment includes net interest
income on retail customer and dealer financing
business and the result of lease business. Leased
products are carried at acquisition cost less straight-
line depreciation down to the imputed residual value
of the vehicles. Leased products are written down
to their fair value where this is lower. Inter-group
profits on own products are eliminated on consoli-
dation and included in the Reconciliations to the
Group profit before tax.
Reconciliations to the Group profit before tax for
the Group include national holding companies, group
financing companies and income and expenses not
specifically attributable to the business segments.
Reconciliations also include certain operating com-
panies which are not allocated to segments, namely
BMW Services Ltd., Bracknell, BMW (UK) Invest-
ments Ltd., Bracknell, and the Softlab Group. Press-
werk Swindon Pressings Ltd., Bracknell, is included
in the Automobiles segment from 1 January 2004
onwards, as it has manufactured exclusively for that
segment since that date.
Other explanatory comments on segment
information
Segment information is generally prepared in con-
formity with the accounting policies adopted for
preparing and presenting the Group financial state-
ments. Inter-segment receivables and payables,
‘provisions, income, expenses and profits are elimi-
nated in Reconciliations. Inter-segment sales take
place at arm’s length prices.
Significant non-cash items comprise mainly
changes in provisions, write-downs, reversal of
write-downs and depreciation on leased products.
Capital expenditure comprises additions to
property, plant and equipment and intangible assets.
Segment assets and segment liabilities com-
prise all assets and liabilities employed by the rele-
vant business segment to generate the profit before
financial result.
The return on sales for each segment is based
on the profit before tax.
Internal financing is computed as the profit be-
fore tax activities adjusted for depreciation and sig-
nificant non-cash items and less actual tax payments.
In the case of segment information by geo-
graphical region, external sales are based on the lo-
cation of the customer’s registered office. Segment
information is provided for the regions Germany,
rest of Europe, the Americas and Africa, Asia and
Oceania, in line with internal management and re-
porting procedures.
BMW Group
Notes to the Group Financial Statements
Segment Information
[45]Segment
information