BMW 2006 Annual Report Download - page 79

78 Group Financial Statements
65 Group Financial Statements
65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of
Changes in Equity
71 Statement of Income and
Expenses recognised directly
in Equity
72 Notes
72 – Accounting Principles
and Policies
79 – Notes to the Income Statement
86 – Notes to the Balance Sheet
104 – Other Disclosures
111 – Segment Information
Financing costs are not included in acquisition
or manufacturing cost.
Provisions for pensions and similar obligations are
recognised using the projected unit credit method in
accordance with IAS 19 (Employee Benefits). Under
this method, not only obligations relating to known
vested benefits at the reporting date are recognised,
but also the effect of future increases in pensions
and salaries. This involves taking account of various
input factors which are evaluated on a prudent basis.
The provision is derived from an independent actu-
arial valuation which takes into account the relevant
biometric factors.
Actuarial gains and losses are recognised, net of
deferred tax, directly in equity.
The expense related to the reversal of discount-
ing on pension obligations and the income from the
expected return on pension plan assets are reported
separately as part of the financial result. All other costs
relating to allocations to pension provisions are allo-
cated to costs by function in the income statement.
Other provisions are recognised when the Group
has an obligation to a third party, an outflow of re-
sources is probable and a reliable estimate can be
made of the amount of the obligation. Measurement
is computed on the basis of fully attributable costs.
Non-current provisions with a remaining period of
more than one year are discounted to the present
value of the expenditures expected to settle the
obligation at the balance sheet date.
Financial liabilities are measured on first-time
recognition at cost, which is equivalent to the fair
value of the consideration given. Transaction costs
are included in this initial measurement. Subse-
quent to initial recognition, liabilities are, with the
exception of derivative financial instruments, meas-
ured at amortised cost. The BMW Group has no
liabilities which are held for trading. Liabilities from
finance leases are stated at the present value of
the future lease payments and disclosed under finan-
cial liabilities.
The preparation of the Group financial state-
ments in accordance with IFRSs requires manage-
ment to make certain assumptions and estimates
that affect the reported amounts of assets and lia-
bilities, revenues and expenses and contingent
liabilities. The assumptions and estimates relate
principally to the group-wide determination of eco-
nomic useful lives, the recognition and measure-
ment of provisions and the recoverability of future
taxbenefits. Actual amounts could in certain cases
differ from those assumptions and estimates.
Where new information comes to light, differences
are reflected in the income statement.
New financial reporting rules
(a) Financial reporting rules applied for the first time
in the financial year 2006
The following revised financial reporting standards
were applied for the first time in the financial year
2006:
– Amendments to IAS 39 and IFRS 4 (Financial
Guarantee Contracts)
– Amendment to IAS 21 (Effects of Changes in
Foreign Exchange Rates)
In addition, the following Interpretations were applied
for the first time:
–IFRIC 4 (Determining whether an Arrangement
contains a Lease)
–IFRIC 5 (Rights to Interests arising from Decom-
missioning, Restoration and Environmental
Rehabilitation Funds)
–IFRIC 6 (Liabilities arising from Participating in a
Specific Market – Waste Electrical and Electronic
Equipment)
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