BMW 2010 Annual Report Download - page 109

107 GROUP FINANCIAL STATEMENTS
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With their current long-term ratings of A– (S & P) and A3
(Moody’s), the agencies continue to confirm BMW AG’s
robust creditworthiness for debt with a term of more
than one year. BMW AG’s creditworthiness for short-term
debt is also classified by the rating agencies as good, thus
enabling it to obtain refinancing funds on competitive
conditions.
Pension provisions
Pension provisions are recognised as a result of commit-
ments to pay future vested pension benefits and current
pensions to present and former employees of the BMW
Group and their dependants. Depending on the legal,
economic and tax circumstances prevailing in each coun-
try, various pension plans are used, based generally on
the length of service, final salary and remuneration struc-
ture of the employees involved. Due to similarity of na-
ture, the obligations of BMW Group companies in the
USA and of BMW (South Africa) (Pty) Ltd., Pretoria, for
post-employment medical care are also disclosed as pen-
sion provisions. The provision for these pension-like ob-
ligations amounts to euro 93 million (2009: euro 70 mil-
lion) and is measured, similar to pension obligations, in
accordance with IAS 19. In the case of post-employment
medical care, it is assumed that costs will increase on a
long-term basis by 6% p. a. (unchanged from the previous
year). The expense for medical care costs in the financial
year 2010 was euro 10 million (2009: euro 7 million). The
provisions for the medical care of employees in the USA
compare with reimbursement claims of euro 8 million
recognised in accordance with IAS 19.104A.
Post-employment benefit plans are classified as either
defined contribution or defined benefit plans. Under de-
fined contribution plans, an enterprise pays fixed con-
tributions into a separate entity or fund and does not as-
sume any other obligations. The total pension expense
for defined contribution plans within the BMW Group
amounted to euro 30 million (2009: euro 31 million).
Employer contributions paid to state pension insurance
schemes totalled euro 406 million (2009: euro 356 mil-
lion).
Under defined benefit plans, the enterprise is required to
pay the benefits granted to present and past employees.
Defined benefit plans may be funded or unfunded, the
latter sometimes covered by accounting provisions. Most
of the pension commitments of the BMW Group in Ger-
many relate to BMW AG. In the financial year 2010, as
previously planned, BMW AG transferred a further por-
tion of its pension obligations to BMW Trust e. V., Munich,
in conjunction with Contractual Trust Agreements (CTAs).
As a result, almost all of the obligations in Germany are
now covered by fund assets. Obligations not covered
byassets held by the fund are covered by pension
provi-
sions. The main other countries with funded plans were
the UK, the USA, Switzerland, the Netherlands, Belgium,
South Africa and Japan.
Pension obligations are computed on an actuarial basis at
the level of the defined benefit obligation. The actuarial
computation requires the use of estimates, based on as-
sumptions relating to life expectancy and the parameters
stated below that depend on the economic situation in
each particular country. The following weighted average
values have been used for Germany, the UK and other
countries:
31 December Germany United Kingdom Other
in % 2010 2009 2010 2009 2010 2009
Discount rate 4.75 5.30 5.30 5.40 5.32 5.54
Salary level trend 3.25 3.25 4.10 4.00 3.89 3.45
Pension level trend 2.25 2.30 3.60 3.38 2.12 1.96