BMW 2007 Annual Report Download - page 60

58 Group Management Report
10 Group Management Report
10 A Review of the Financial Year
13 General Economic Environment
17 Review of Operations
41 BMW Stock and Bonds
44 Disclosures relating to Takeover
Regulations and Explanatory Report
47 Financial Analysis
47 – Internal Management System
49 – Earnings Performance
51 – Financial Position
52 – Net Assets Position
55 – Subsequent Events Report
55 – Value Added Statement
57 – Key Performance Figures
58 – Comments on BMW AG
62 Risk Management
68 Outlook
Comments on the financial statements of
BMW AG
Whereas the Group financial statements are drawn
up in accordance with IFRSs issued by the IASB, the
financial statements of BMW AG are drawn up in
accordance with the provisions of the German Com-
mercial Code (HGB). Where it is permitted and con-
sidered sensible, the principles and policies of IFRSs
are also applied in the individual company financial
statements. The pension provision in the individual
company financial statements, for example, is also
determined in accordance with IAS 19 and the full
defined benefit obligation recognised. In numerous
other cases, however, the accounting principles and
policies in the individual company financial state-
ments of BMW AG differ from those applied in the
Group financial statements. The main differences
relate to the recognition of intangible assets, depre-
ciation and amortisation methods, the measurement
of inventories and provisions as well as the treatment
of financial assets.
BMW AG develops, manufactures and sells cars
and motorcycles manufactured by itself and foreign
subsidiaries. These vehicles are sold through the
Company’s own branches, independent dealers, sub-
sidiaries and importers. The number of cars manu-
factured at German and foreign plants in 2007 rose
by 12.8 % to 1,541,503 units. At 31 December 2007,
BMW AG had 76,064 employees, 92 fewer than one
year earlier. Wage earners account for approximately
53 % of the workforce.
In 2007, revenues were 13.9 % higher than in
the previous year. Sales to foreign Group sales com-
panies accounted for euro 36.0 billion or approxi-
mately 74.5 % of the total revenues of euro 48.3 bil-
lion. Cost of sales increased slightly faster than
revenues. In absolute terms, gross profit improved
by euro 0.8 billion (+ 13.4 %) and amounted to euro
6.9 billion.
Adverse currency factors in the area of the US
dollar and Japanese yen as well as continued in-
tense competition on the automobile markets had
a negative impact on BMW AG’s earnings. The
change in the interest rate used to discount the pen-
sion provision (raised from 4.40 % in 2006 to 5.50 %
in 2007) and the new Retirement Age Amendment
Act both had a positive impact on earnings.
Capital expenditure on intangible assets and
property, plant and equipment was increased by
26.1 % to euro 1,670 million (2006: euro 1,324 mil-
lion), with the increase mainly attributable to the
high level of product and infrastructure investments
made at the Dingolfing plant. Depreciation and
amortisation amounted to euro 1,791 million.
Equity rose by euro 727 million to euro 5,648
million. The existing authorisation to acquire treasury
shares was not exercised during the financial year
2007. The equity ratio increased from 23.4 % to
25.0 %. Long-term external capital (registered profit-
sharing certificates, special untaxed reserves, pen-
sion provisions, the liability to the BMW Unterstüt-
zungsverein e.V. and liabilities due after one year)
decreased by 15.0 % to euro 4,068 million.
A special untaxed reserve pursuant to § 6b (3)
German Income Tax Act (EStG) was recognised in
2007.
As in previous years, the cash inflow from
BMW AG’s operating activities was utilised in 2007
to finance the operations of affiliated companies.