BMW 2005 Annual Report Download - page 71

70
BMW Group
Notes to the Group Financial Statements
Accounting Principles and Policies
[1]Basis of
preparation
The consolidated financial statements of Bayerische
Motoren Werke Aktiengesellschaft (“BMW Group
financial statements” or “Group financial statements”)
at 31 December 2005 have been drawn up in accor-
dance with International Financial Reporting Stan-
dards (IFRSs) as applicable in the EU. The designa-
tion “IFRSs” also includes all valid International
Accounting Standards (IASs). All interpretations of
the International Financial Reporting Interpretations
Committee (IFRIC) mandatory for the financial year
2005 were also applied.
The Group financial statements comply in their
present form with provision §315a of the German
Commercial Code (HGB). This provision, in conjunc-
tion with the Regulation (EC) No.1606/2002 of the
European Parliament and Council of 19 July 2002,
relating to the application of International Financial
Reporting Standards, provides the legal basis for
preparing consolidated financial statements in ac-
cordance with international standards in Germany
and applies to financial years beginning on or after
1 January 2005.
The BMW Group and sub-group income state-
ments are presented using the cost of sales method.
The Group balance sheet and sub-group balance
sheets correspond to the classification provisions
contained in IAS1 (Presentation of Financial State-
ments). In order to improve clarity, various items are
aggregated in the income statement and balance
sheet. These items are disclosed and analysed sep-
arately 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 retail customers
and to dealers. 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 insight 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 finan-
cial operations. Financial operations include financial
services and the activities of the Group financing
companies.The operating interest income and ex-
pense of financial operations are included in rev-
enues and cost of sales respectively. The holding
companies BMW (UK) Holdings Ltd., Bracknell,
BMW Holding B.V., The Hague, BMW Österreich
Holding GmbH, Steyr, BMW (US) Holding Corp.,
Wilmington, and BMW España Finance S.L., Madrid,
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 compa-
nies and the related interest. These additional dis-
closures allow the assets, liabilities, financial posi-
tion and performance of the industrial and financial
operations to be presented, in accordance with
the recognition and measurement principles stipu-
lated 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 receivables
arising from retail customer and dealer financing is
sold. Similarly, rights and obligations relating to leases
are sold. The sale of receivables is a well established
instrument used by industrial and financial compa-
nies. These transactions are usually in the form of
“asset backed financing” transactions involving 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 and receives an appropri-
ate fee for these services. In accordance with IAS 27
(Consolidated and Separate Financial Statements)
and the interpretation contained in SIC-12 (Consoli-
dation – Special Purpose Entities) such assets
remain in the Group financial statements although
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