BMW 2007 Annual Report Download - page 82

80 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
[1]
BMW Group
Notes to the Group Financial Statements
Accounting Principles and Policies
Basis of preparation
The consolidated financial statements of Bayerische
Motoren Werke Aktiengesellschaft (BMW Group
financial statements or Group financial statements)
at 31 December 2007 have been drawn up in ac-
cordance with International Financial Reporting
Standards (IFRSs) as endorsed by the EU. The des-
ignation IFRSs also includes all valid International
Accounting Standards (IASs). All interpretations of
the International Financial Reporting Interpretations
Committee (IFRIC) mandatory for the financial year
2007 are also applied.
The Group financial statements comply with
provision § 315a of the German Commercial Code
(HGB). This provision, in conjunction 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 accordance 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 IAS 1 (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 its 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 bet-
ter insight into the earnings, financial and net assets
position of the Group, additional information has been
presented in the BMW Group financial statements
on its Industrial and Financial Operations. Financial
Operations include financial services and the activities
of the Group financing companies. The operating
interest income and expense of Financial Operations
are included in revenues and cost of sales respec-
tively. The holding companies BMW (UK) Holdings
Ltd., Bracknell, BMW Holding B.V., The Hague, BMW
Österreich Holding GmbH, Steyr, BMW (US) Holding
Corp., Wilmington, Del., BMW España Finance S. L.,
Madrid, and BMW Holding Malaysia Sdn Bhd,
Kuala Lumpur, are allocated to Industrial Operations.
The main business transactions between 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 disclo-
sures allow the assets, liabilities, financial position
and performance of Industrial and Financial Opera-
tions to be presented, in accordance with the recog-
nition and measurement principles stipulated by
IFRSs, as if they were two separate groups. This in-
formation, 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 companies. 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 market-
able securities to refinance the purchase price. The
BMW Group continues to service the receivables
and receives an appropriate fee for these services. In
accordance with IAS 27 (Consolidated and Separate
Financial Statements) and the interpretation con-
tained in SIC-12 (Consolidation – Special Purpose
Entities) such assets remain in the Group financial
statements although they have been legally sold.
Gains and losses relating to the sale of such assets
are not recognised until the assets are removed from
the Group balance sheet on transfer of the related
significant risks and rewards. The balance sheet value
of the assets sold at 31 December 2007 totalled
euro 6.3 billion (31 December 2006: euro 4.5 billion).
For an additional understanding of the asset, liability
and financial position of the BMW Group, the Group
balance sheet contains a supplementary disclosure
of the balance sheet total adjusted for assets which
have been sold.
In addition to credit financing and lease con-
tracts, the Financial Services segment also brokers
insurance business via cooperation arrangements
entered into with local insurance companies. These
activities are not material to the BMW Group as a
whole.
The Group currency is the euro. All amounts are
disclosed in millions of euros (euro million) unless
stated otherwise.
All of the consolidated subsidiaries have a cor-
responding year-end to BMW AG.