BMW 2008 Annual Report Download - page 57

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14 Group Management Report
14 A Review of the Financial Year
16 General Economic Environment
20 Review of Operations
42 BMW Stock and Bonds
45 Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
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 Commercial Code (HGB).
Where it is permitted and considered sensible, the princi-
ples 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  and the full
defined benefit obligation recognised. In numerous other
cases, however, the accounting principles and policies in
the individual company financial statements of BMW AG
differ from those applied in the Group Financial State-
ments.
The main differences relate to the recognition of
intangible assets, depreciation and amortisation methods,
the measurement of inventories and provisions as well as
the treatment of financial instruments.
BMW AG develops, manufactures and sells cars and mo-
torcycles manufactured by itself and foreign subsidiaries.
These vehicles are sold through the Company’s own
branches, independent dealers, subsidiaries and import-
ers. The number of cars manufactured at German and
foreign plants in  decreased by .  to ,, units.
At  December , BMW AG had , employees,
, fewer than one year earlier. This is largely due to the
implementation of previously reported measures to re-
duce the size of the workforce. The expenditure incurred
in this context increased administrative costs.
Consumer reluctance to spend in the face of the current
financial crisis as well as model life cycle factors caused a
reduction in the number of cars sold by BMW AG. As a con-
sequence,
revenues fell in  by . . Sales to foreign
group sales companies accounted for euro . billion or
approximately .  of the total revenues of euro . bil-
lion. In percentage terms, the decrease in cost of sales was
slightly more pronounced than the decrease in revenues.
Gross profit fell by euro . billion – .  and amounted to
euro . billion.
Adverse currency factors relating to the US dollar and
Japanese yen as well as continued intense competition on
the automobile markets had a negative impact on BMW
AG’s earnings.
In conjunction with measures to optimise the structure
of investments within the BMW Group, BMW AG incurred
a loss of the disposal of subsidiaries and a higher profit on
an existing profit and loss transfer agreement. Investments
were reduced as a result of this transaction.
Capital expenditure on intangible assets and property,
plant and equipment amounted to euro , million (:
euro , million), up .  compared to the previous
year. The increase was mainly related to high product in-
vestments for the new BMW 7 Series and the new Z4.
Depreciation and amortisation amounted to euro , mil-
lion.
In order to secure obligations resulting from pre-retirement
part-time work arrangements and a part of the Company’s
pension obligations, an amount of euro , million was
transferred to the newly founded BMW Trust e. V., Munich,
in conjunction with a Contractual Trust Arrangement
(CTA).
Equity decreased by euro  million to euro , million.
The existing authorisation to acquire treasury common
stock shares was not exercised during the financial year
. Of the preferred stock treasury shares acquired dur-
ing , , shares were held by the Company at the
end of the reporting period. The equity ratio decreased
from .  to . . Long-term external capital (registered
profit-sharing certificates, pension provisions, the liability
to the BMW Unterstützungsverein e. V. and liabilities due
later than one year) increased by .  to euro , mil-
lion. Despite the heightening of the financial crisis during
the second half of , BMW AG had access to the credit
and financial markets at all times and was able to increase
its liquid funds significantly.