BMW 2008 Annual Report Download - page 81

82
72 Group Financial Statements
72 Income Statements
74 Balance Sheets
76 Cash Flow Statements
78 Statement of Income and
Expenses recognised
in Equity
79 Notes
79 Accounting Principles
and Policies
88 Notes to the Income
Statement
94
Notes to the Balance Sheet
1 1 5 Other Disclosures
1 2 9 Segment Information
4
5 Foreign currency translation
The financial statements of consolidated companies which
are drawn up in a foreign currency are translated using
the functional currency concept (IAS : The Effects of
Changes in Foreign Exchange Rates) and the modified
closing rate method. The functional currency of a sub-
sidiary is determined as a general rule on the basis of the
primary economic environment in which it operates and
corresponds therefore to the relevant local currency. In-
come and expenses of foreign subsidiaries are translated
in the Group Financial Statements at the average ex-
change rate for the year, and assets and liabilities are trans-
lated at the closing rate. Exchange differences arising from
the translation of shareholders’ equity are offset directly
against accumulated other equity. Exchange differences
arising from the use of different exchange rates to translate
the income statement are also offset directly against accu-
mulated other equity.
Foreign currency receivables and payables in the single
entity accounts of BMW AG and subsidiaries are recorded,
at the date of the transaction, at cost. Exchange gains and
losses computed at the end of the reporting period are
recognised as income or expense.
The exchange rates of those currencies which have a
material impact on the Group Financial Statements were
as follows:
Consolidation principles
The equity of subsidiaries is consolidated in accordance
with IFRS  (Business Combinations). IFRS  requires that
all business combinations are accounted for using the
purchase method, whereby identifiable assets and liabili-
ties acquired are measured initially at their fair value. The
excess of the Group’s interest in the net fair value of the
identifiable assets and liabilities acquired over cost is
recognised as goodwill and is subjected to a regular review
for possible impairment. Goodwill of euro  million which
arose prior to  January  is netted against reserves.
The companies BMW Roma S. r. l., Rome, and BMW de
Argentina S. A., Buenos Aires, were consoli dated for the
first time with effect from  January . The equivalent
date for BMW Lease (Malaysia) Sdn Bhd, Kuala Lumpur,
and BMW Credit (Malaysia) Sdn Bhd, Kuala Lumpur, was
 April , and that for BMW of Manhattan, Inc., Wilming-
ton, Del., was  October .
Receivables, liabilities, provisions, income and expenses
and profits between consolidated companies (intragroup
profits) are eliminated on consolidation.
Under the equity method, investments are measured at
the BMW Group’s share of equity taking account of fair
value adjustments on acquisition, based on the Group’s
shareholding. Any difference between the cost of invest-
ment and the Group’s share of equity is accounted for in
accordance with the purchase method. Investments in
other companies are accounted for as a general rule using
the equity method when significant influence can be exer-
cised (IAS  Investments in Associates). This is normally
the case when voting rights of between   and   are
held (associated companies).
Accounting principles
The financial statements of BMW AG and of its subsidiar-
ies in Germany and elsewhere have been prepared for
consolidation purposes using uniform accounting policies
in accordance with IAS .
Revenues from the sale of products are recognised when
the risks and rewards of ownership of the goods are trans-
ferred to the customer, the sales price is agreed or deter-
minable and receipt of payment can be assumed. Rev-
enues are stated net of discounts, allowances, settlement
Closing rate Average rate
31.12. 2008 31.12. 2007 2008 2007
US Dollar 1.40 1.46 1.47 1.37
British Pound 0.95 0.73 0.80 0.68
Chinese Renminbi 9.54 10.70 10.23 10.42
Japanese Yen 126.74 163.77 152.29 161.28
Australian Dollar 2.03 1.67 1.74 1.64
6