BMW 2014 Annual Report Download - page 108

108
90 GROUP FINANCIAL STATEMENTS
90 Income Statements
90 Statement of
Comprehensive Income
92 Balance Sheets
94 Cash Flow Statements
96 Group Statement of Changes in
Equity
98 Notes
98 Accounting Principles and
Policies
116 Notes to the Income Statement
123 Notes to the Statement
of Comprehensive Income
124
Notes to the Balance Sheet
149 Other Disclosures
165 Segment Information
The calculation of deferred tax assets requires assump-
tions
to be made with regard to the level of future tax-
able
income and the timing of recovery of deferred tax
assets. These assumptions take account of forecast oper-
ating results and the impact on earnings of the reversal
of taxable temporary differences. Since future business
developments cannot be predicted with certainty and to
some extent cannot be influenced by the BMW Group,
the measurement of deferred tax assets is subject to un-
certainty. Further information is provided in note 17.
Current income taxes are computed throughout the
BMW Group in accordance with tax legislation appli-
cable in each relevant country. In situations where a
permissible element of discretion has been applied in
determining the amount of a tax exposure to be recog-
nised in the financial statements, there is always a pos-
sibility that local tax authorities may reach a different
conclusion.
The calculation of pension provisions requires assump-
tions to be made with regard to discount factors, salary
trends, employee fluctuation and the life expectancy
of
employees. As in previous years, discount factors are
determined by reference to market yields at the end of
the reporting period on high quality corporate bonds.
The salary level trend refers to the expected rate of
salary
increase which is estimated annually depending
on inflation and the career development of employees
within the Group. Further information is provided in
note 36.
Estimations are required for the purposes of recognis-
ing and measuring provisions for warranty obligations
(statutory, contractual and voluntary). In addition to
statutorily prescribed manufacturer warranties, the
BMW Group also offers various categories of warranty
depending on the product and sales market concerned.
Warranty provisions are recognised when the risks
and
rewards of ownership of the goods are transferred
to the dealer or retail customer or when a new category
of warranty is introduced. In order to determine the
level of the provision, various factors are taken into
consideration, including estimations based on past ex-
perience with the nature and amount of claims. These
estimations also involve assessing the future level of
potential repair costs and price increases per product
and market. Provisions for warranties are adjusted
regularly to take account of new circumstances and the
impact of any changes recognised in the income
state-
ment. Further information is provided in note 37.
Similar estimates are also made in conjunction with the
measurement of expected reimbursement claims.
In the event of involvement in legal proceedings or
when claims are brought against a Group entity, provi-
sions for litigation and liability risks are recognised
when an outflow of resources is probable and a reliable
estimate can be made of the amount of the obligation.
Management is required to make assumptions with re-
spect to the probability of occurrence, the amount in-
volved and the duration of the legal dispute. For these
reasons, the recognition and measurement of provi-
sions for litigation and liability risks are subject to un-
certainty. Further information is provided in note 37.
In addition, judgement is required in particular when
assessing whether the risks and rewards incidental to
ownership of a leased asset have been transferred for
the purposes of determining the classification of leasing
arrangements.
Determining the scope of consolidated companies to
be
included in the Group Financial Statements may
involve the use of judgement. In particular when the
BMW Group holds 50 % or less of the voting rights, a
detailed assessment must be made as to whether sole
control, joint control or significant influence applies.
For instance, other contractual rights and / or other mat-
ters and circumstances could result in the conclusion
that the BMW entity concerned controls or jointly
con-
trols an entity in which it has a participation. In the
latter case, it must then be decided whether the joint
arrangement is a joint operation or a joint venture. In
making its judgement, the BMW Group must take all
contractual arrangements and other circumstances into
account, and not just the structure and legal form of
the entity. A new assessment is made in the event of
any indication of changes in the previous assessment of
(joint) control. Further information is provided in note 2.