BMW 2010 Annual Report Download - page 85

83 GROUP FINANCIAL STATEMENTS
Consolidation principles
The equity of subsidiaries is consolidated in accordance
with IFRS3 (Business Combinations). IFRS3 requires
that all business combinations are accounted for using
the acquisition method under which identifiable assets
and liabilities acquired are measured at the acquisition
date 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 sub-
jected to a regular review for impairment. Goodwill of
euro 91 million which arose prior to 1 January 1995 re-
mains
netted against reserves.
Receivables, liabilities, provisions, income and expenses
and profits between consolidated companies (intra-group
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. Any difference be-
tween the cost of investment and the Group’s share of
equity is accounted for in accordance with the acquisition
method. Investments in other companies are accounted
for as a general rule using the equity method when signifi-
cant
influence can be exercised (IAS 28, Investments in
Associates). This is normally the case when voting rights
of between 20% and 50% are held (associated companies).
3
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 21: 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 of the basis on 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 exchange
rate for the year, and assets and liabilities are translated
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 trans-
late the income statement are also offset directly against
accumulated other equity.
Foreign currency receivables and payables in the single
entity accounts of BMW AG and subsidiaries are
re-
corded, at the date of the transaction, at cost. Exchange
gains and losses computed at the balance sheet date 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:
4
Accounting policies
The financial statements of BMW AG and of its subsidi-
aries in Germany and elsewhere have been prepared for
consolidation purposes using uniform accounting policies
in accordance with IAS 27.
Revenues from the sale of products are recognised when
the risks and rewards of ownership of the goods are
transferred to the customer, the sales price is agreed or
determinable and receipt of payment can be assumed.
Revenues are stated net of discounts, allowances, settle-
ment discount and rebates. Revenues also include lease
rentals and interest income from financial services.
If the sale of products includes a determinable amount
for subsequent services (multiple-component contracts),
the related revenues are deferred and recognised as
income over the period of the contract. Amounts are
normally recognised as income by reference to the pat-
tern of related expenditure.
5
Closing rate Average rate
31.12. 2010 31.12. 2009 2010 2009
US Dollar 1.34 1.43 1.33 1.39
British Pound 0.86 0.89 0.86 0.89
Chinese Renminbi 8.80 9.78 8.97 9.52
Japanese Yen 108.61 133.17 116.29 130.37