BMW 2007 Annual Report Download - page 110

108 Group Financial Statements
73 Group Financial Statements
73 Income Statements
74 Balance Sheets
76 Cash Flow Statements
78 Group Statement of Changes
in Equity
79 Statement of Income and
Expenses recognised directly
in Equity
80 Notes
80 – Accounting Principles
and Policies
89 – Notes to the Income
Statement
96 – Notes to the Balance Sheet
117 – Other Disclosures
131 – Segment Information
lion (2006: euro 49 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. (unchanged from the previous year).
The expense for medical care costs in the financial
year 2007 amounted to euro 6 million (2006: euro
6 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 442 million
(2006: euro 409 million). This includes employer con-
tributions paid to state pension insurance schemes
amounting to euro 406 million (2006: euro 388 mil-
lion).
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 commitments of the BMW Group in Ger-
many relate to BMW AG, whose pension plans, like
all those of the BMW Group’s German sub sidiaries,
are unfunded and financed by means of accounting
provisions. In addition, a deferred remuneration
retirement scheme is in place which is
funded by
employee contributions. 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 expect-
ancy, depend on the economic situation in each
particular country. The following disclosures for the
United Kingdom (UK) and the other countries are
based on weighted average values:
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 contribu-
tions, the surplus amount is recognised in accord-
ance with IAS 19 as an asset under other assets. In
the case of funded pension plans, a liability is recog-
nised under pension provisions where the benefit
obligation exceeds fund assets.
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
parameters, changes in estimates caused by the
actual development of risks impacting on pension
obligations and differences between the actual and
expected return on plan assets. Past service cost
arises where a BMW Group company introduces a
defined benefit plan or changes the benefits payable
under an existing plan.
in % Germany UK Other
31 December 2007 2006 2007 2006 2007 2006
Discount rate 5.50 4.40 5.53 5.11 5.78 5.19
Salary level trend 3.25 3.25 4.39 4.12 3.36 2.59
Pension level trend 1.75 1.75 3.38 3.09 1.90 1.79