BMW 2010 Annual Report Download - page 87

85 GROUP FINANCIAL STATEMENTS
For machinery used in multiple-shift operations, depre-
ciation rates are increased to account for the additional
utilisation.
The cost of internally constructed plant and equipment
comprises all costs which are directly attributable to the
manufacturing process and an appropriate proportion
ofproduction-related overheads. This includes produc-
tion-related depreciation and an appropriate proportion
of administrative and social costs.
As a general rule, borrowing costs are not included in
acquisition or manufacturing cost. Borrowing costs that
are directly attributable to the acquisition, construction
or production of a qualifying asset are recognised as a
part of the cost of that asset in accordance with IAS 23
(Borrowing Costs).
Non-current assets also include assets relating to leases.
The BMW Group uses property, plant and equipment
aslessee and also leases out assets, mainly vehicles pro-
duced by the Group, as lessor. IAS 17 (Leases) contains
rules for determining, on the basis of risks and rewards,
the economic owner of the assets. In the case of finance
leases the assets are attributed to the lessee and in the
case
of operating leases the assets are attributed to the
lessor.
In accordance with IAS 17, assets leased under finance
leases are measured at their fair value at the inception of
the lease or at the present value of the lease payments,
iflower. The assets are depreciated using the straight-
line method over their estimated useful lives or over the
lease period, if shorter. The obligations for future lease
instalments are recognised as financial liabilities.
Where Group products are recognised by BMW Group
leasing companies as leased assets under operating leases,
they are measured at manufacturing cost. All other
leased products are measured at acquisition cost. All leased
products are depreciated using the straight-line method
over the period of the lease to the lower ofthe contrac-
tual value. Residual value provisions are treated as write-
downs andoffset against leased products on the assets
side of the balance sheet.
The imputed residual value of leased products is c om-
puted by the BMW Group on the basis of forecasts issued
by external institutes (e.g. EurotaxSchwacke) or actual
realised market values. Measurement also takes account
of other relevant up-to-date information. The underlying
assumptions are validated regularly in conjunction with
internal back-testing procedures.
The recoverability of the carrying amount of intangible
assets (including capitalised development costs and
goodwill) and property, plant and equipment is tested
regularly for impairment in accordance with IAS 36 (Im-
pairment of Assets) on the basis of cash generating units.
If there is no indication of impairment during the year,
anannual impairment test is carried out at the year-end
for intangible assets not yet available for use, for intan-
gible
assets with an indefinite useful life and for goodwill
acquired as part of a business combination. In all other
cases, an impairment test is carried out when changed
circumstances or events indicate that the asset may be
impaired. An impairment loss is recognised when the
recoverable amount (defined as the higher of the asset’s
net selling price and its value in use) is lower than the
carrying amount. The value in use is determined on the
basis of a present value computation. If the reason for
thepreviously recognised impairment loss no longer
exists, the impairment loss is reversed up to the level of
its rolled-forward depreciated or amortised cost. This
does not, however, apply to goodwill: previously recog-
nised
impairment losses on goodwill are not reversed.
Investments accounted for using the equity method
are (except when the investment is impaired) measured
at the Group’s share of equity taking account of fair value
adjustments on acquisition.
Investments in non-consolidated Group companies re-
ported in other investments are measured at cost or, if
lower, at their fair value.
Participations are measured at their quoted market price
or fair value. When, in individual cases, these values are
not available or cannot be determined reliably, participa-
tions are measured at cost.
Non-current marketable securities are measured accord-
ing to the category of financial asset to which they are
classified. No held-for-trading financial assets are included
under this heading.
A financial instrument is a contract that gives rise to a
financial asset of one entity and a financial liability or