BMW 2008 Annual Report Download - page 85

86
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
the related hedged items are recognised in the income
statement. In the case of fair value changes in cash flow
hedges which are used to mitigate the future cash flow
risk on a recognised asset or liability or on forecast transac-
tions, unrealised gains and losses on the hedging instru-
ment are recognised initially directly in accumulated other
equity. Any such gains or losses are recognised
subse-
quently in the income statement when the hedged item
(usually external revenue) is recognised in the income
statement. The portion of the gains or losses from fair value
measurement not relating to the hedged item is recog-
nised immediately in the income statement. If, contrary to
the normal case within the BMW Group, hedge account-
ing cannot be applied, the gains or losses from the fair
value measurement of derivative financial instruments are
recognised immediately in the income statement.
In accordance with IAS  (Income Taxes), deferred taxes
are recognised on all temporary differences between the
tax and accounting bases of assets and liabilities and on
consolidation procedures. Deferred tax assets also in-
clude claims to future tax reductions which arise from the
expected usage of existing tax losses available for carry-
forward (where future usage is probable). Deferred taxes
are computed using enacted or planned tax rates which
are expected to apply in the relevant national jurisdictions
when the amounts are recovered.
Inventories of raw materials, supplies and goods for
resale are stated at the lower of average acquisition cost
and net
realisable value.
Work in progress and finished goods are stated at the
lower of average manufacturing cost and net realisable
value. Manufacturing cost comprises all costs which are
directly attributable to the manufacturing process and
an appropriate proportion of production-related over-
heads.
This includes production-related depreciation
and an appropriate proportion of administrative and social
costs.
Financing costs are not included in acquisition or manu-
facturing cost.
Provisions for pensions and similar obligations are recog-
nised using the projected unit credit method in accord-
ance with IAS  (Employee Benefits). Under this method,
not only obligations relating to known vested benefits at
the reporting date are recognised, but also the effect of
future increases in pensions and salaries. This involves
taking account of various input factors which are evaluated
on a prudent basis. The provision is derived from an in-
dependent actuarial valuation which takes into account all
relevant biometric factors.
Actuarial gains and losses are recognised, net of deferred
tax, directly in equity.
The expense related to the reversal of the discounting of
pension obligations and the income from the expected
return on pension plan assets are reported separately as
part of the financial result. All other costs relating to alloca-
tions to pension provisions are allocated to costs by func-
tion in the income statement.
Other provisions are recognised when the BMW Group
has an obligation to a third party, an outflow of resources
is probable and a reliable estimate can be made of the
amount of the obligation. Measurement is computed on
the basis of fully attributable costs. Non-current provi-
sions
with a remaining period of more than one year are
discounted to the present value of the expenditures ex-
pected to settle the obligation at the end of the reporting
period.
Financial liabilities are measured on first-time recognition
at cost, which is equivalent to the fair value of the con-
sideration given. Transaction costs are included in this
initial measurement. Subsequent to initial recognition, lia-
bilities are, with the exception of derivative financial
instru-
ments, measured at amortised cost. The BMW Group
has
no liabilities which are held for trading. Liabilities from
finance leases are stated at the present value of the future
lease payments and disclosed under other financial lia-
bilities.
The preparation of the Group Financial Statements in ac-
cordance with IFRSs requires management to make cer-
tain assumptions and estimates that affect the reported
amounts of assets and liabilities, revenues and expenses
and contingent liabilities. The assumptions and estimates
relate principally to the groupwide determination of eco-
nomic useful lives, the recognition and measurement of
provisions and the recoverability of future tax benefits. All
assumptions and estimates are based on factors known
at
the end of the reporting period. They are determined
on
the basis of the most likely outcome of future business
developments.
This includes the situation in the auto-