BMW 2008 Annual Report Download - page 78

79 Group Financial Statements
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 
De-
cember  have been drawn up in accordance with
International Financial Reporting Standards (IFRSs) as en-
dorsed by the EU. The designation “IFRSs” also includes
all valid International Accounting Standards (IASs). All Inter-
pretations of the International Financial Reporting Inter-
pretations Committee (IFRIC) mandatory for the financial
year  are also applied.
The Group Financial Statements comply with   a of
the German Commercial Code (HGB). This provision, in
conjunction with the Regulation (EC) No.  /  of the
European Parliament and Council of  July , relating
to the application of International Financial Reporting
Standards, provides the legal basis for preparing consoli-
dated financial statements in accordance with interna-
tional
standards in Germany and applies to financial years
beginning on or after  January .
The BMW Group and segment income statements are
presented using the cost of sales method. The Group and
segment balance sheets correspond to the classification
provisions contained in IAS  (Presentation of Financial
Statements).
In order to improve clarity, various items are aggregated in
the income statement and balance sheet. These items are
disclosed and analysed separately in the Notes.
In order to support the sale of its products, the BMW Group
provides various financial services – mainly credit and
lease financing – to retail customers and to dealers. The in-
clusion of the financial services activities of the Group has
a significant impact on the Group Financial Statements.
To coincide with the first-time application of IFRS 
(Operating Segments) at  December , the previous
practise of providing additional information on the BMW
Group’s Industrial Operations and Financial Operations has
been discontinued and replaced by the uniform presenta-
tion of segment information. In addition to the mandatory
segment information disclosures required by IFRS , addi-
tional detailed segment information is provided on a volun-
tary basis in order to provide a better insight into the earn-
ings, financial and net assets position of the BMW Group.
The changes relate to the following:
– supplementation of the Group Income Statement with
segment income statements for the Automobiles,
Motorcycles, Financial Services and Other Entities seg-
ments,
– supplementation of the Group Balance Sheet with seg-
ment balance sheets for the Automobiles, Motorcycles,
Financial Services and Other Entities segments and
– supplementation of the Group Cash Flow Statement
with segment cash flow statements for the Automobiles
and Financial Services segments.
Inter-segment transactions – relating primarily to internal
sales of products, the provision of funds and the related in-
terest – are eliminated in the “Eliminations” column. Fur-
ther information regarding the allocation of activities of the
BMW Group to segments and a description of the seg-
ments is
provided in the explanatory notes to segment in-
formation
on pages  – . The differences between
the new
and old method of presentation and a reconcilia-
tion of significant performance indicators can be found
on the
BMW Group’s website at www.bmwgroup.com/ir.
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 marketable securities to refinance the purchase
price. The BMW Group continues to “service” the receiv-
ables and receives an appropriate fee for these services.
In accordance with IAS  (Consolidated and Separate
Financial Statements) and the interpretation contained in
SIC- (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  December  totalled
euro . billion ( December : euro . billion).
In addition to credit financing and lease contracts, the
Financial Services segment also brokers insurance
busi-
ness via cooperation arrangements entered into with
1