BMW 2015 Annual Report Download - page 103

103 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 as well as an appropriate pro-
portion of production-related overheads. This includes
production-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 on the one hand and leases out vehicles produced
by the Group and other brands as lessor on the other.
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 at-
tributed 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 other financial liabili-
ties.
Where Group products are recognised by BMW Group
entities as leased products under operating leases, they
are measured at manufacturing cost. All other leased
products are measured at acquisition cost. All leased
products are depreciated over the period of the lease
using the straight-line method down to their expected
residual value. Changes in residual value expectations
are recognised – in situations where the recoverable
amount of the lease exceeds the asset’s carrying amount –
by adjusting scheduled depreciation prospectively over
the remaining term of the lease contract. If the recover-
able amount is lower than the asset’s carrying amount,
an impairment loss is recognised for the shortfall. A test
is carried out at each balance sheet date to determine
whether an impairment loss recognised in prior years no
longer exists or has decreased. In these cases, the carry-
ing amount of the asset is increased to the recoverable
amount. The higher carrying amount resulting from the
in years
Factory and office buildings, residential buildings, fixed installations in buildings and outside facilities 8 to 50
Plant and machinery 3 to 21
Other equipment, factory and office equipment 2 to 25
Development costs for vehicle and engine projects
are capitalised at manufacturing cost, to the extent
that attributable costs can be measured reliably and
both technical feasibility and successful marketing
are assured. It must also be probable that the devel-
opment
expenditure will generate future economic
benefits. Capitalised development costs comprise all
expenditure that can be attributed directly to the de-
velopment
process, including development-related
overheads. Capitalised development costs are amor-
tised systematically over the estimated product life
(usually four to eleven years) following the start of
production.
Goodwill arises on first-time consolidation of an ac-
quired business when the cost of acquisition exceeds
the Group’s share of the fair value of the individually
identifiable assets acquired and liabilities and contin-
gent liabilities assumed.
All items of property, plant and equipment are consid-
ered to have finite useful lives. They are recognised at
acquisition or manufacturing cost less scheduled
de-
preciation based on the estimated useful lives of the
assets. Depreciation on property, plant and equipment
reflects the pattern of their usage and is generally com-
puted using the straight-line method. Components of
items of property, plant and equipment with different
useful lives are depreciated separately.
Systematic depreciation is based on the following useful
lives, applied throughout the BMW Group: