BMW 2015 Annual Report Download - page 155

155 GROUP FINANCIAL STATEMENTS
Fair value gains and losses recognised on derivatives and
recorded initially in accumulated other equity are re-
classified to cost of sales when the derivatives mature.
An amount of € 8 million (2014: € – million) attributable
to forecasting errors (and the resulting over-hedging of
currency exposures) was recognised as a loss in
“Finan-
cial Result” in the period under report. Gains attributable
to the ineffective portion of cash flow hedges amount-
ing to € 9 million were recognised in “Financial Result”
(2014: losses of € 27 million). No gains or losses were
recognised in “Financial Result” in 2015 in connection
with forecasting errors relating to cash flow hedges for
commodities (2014: losses of € 6 million). Losses
attribut-
able to the ineffective portion of cash flow hedges
amounting to € 13 million were also recognised in “Finan-
cial
Result” (2014: gains of € 6 million).
At 31 December 2015 the BMW Group held derivative
financial instruments (mainly forward currency and
option contracts) with terms of up to 55 months (2014:
60 months) in order to hedge currency risks attached
to
future transactions. These derivative instruments are
intended to hedge forecast sales denominated in a foreign
currency over the coming 55 months. The income state-
ment impact of the hedged cash flows will be recognised
as a general rule in the same periods in which external
revenues are recognised. It is expected that € 623 million
of net losses, recognised in equity at the end of the
re-
porting period, will be reclassified to profit and loss in
the new financial year (2014: losses of € 278 million).
The BMW Group did not hold any derivative financial
instruments at 31 December 2015, which had been
designated as cash flow hedges to hedge against inter-
est-rate risks.
At 31 December 2015 the BMW Group held derivative
financial instruments (mostly commodity swaps) with
terms of up to 58 months (2014: 59 months) to hedge
raw materials price risks attached to future transactions
over the coming 58 months. The income statement im-
pact of the hedged cash flows will be recognised as a
general rule in the same periods in which the derivative
matures
. It is expected that € 127 million of net losses,
recognised in equity at the end of the reporting period,
will be reclassified to profit and loss in the new finan-
cial year (2014: € 54 million).
Fair value hedges
The following table shows gains and losses on hedging
instruments and hedged items which are deemed to be
part of a fair value hedge relationship:
The difference between the gains / losses on hedging
instruments (mostly interest rate swaps) and the results
recognised on hedged items represents the ineffective
portion of fair value hedges.
Fair value hedges are mainly used to hedge the market
prices of bonds, other financial liabilities and receivables
from sales financing.
Bad debt risk
Notwithstanding the existence of collateral accepted,
the carrying amounts of financial assets generally take
account of the maximum credit risk arising from the
possibility that the counterparties will not be able to
fulfil their contractual obligations. The maximum credit
risk for irrevocable credit commitments relating to
credit card business amounts to € 2,011 million (2014:
€ 1,181 million). The equivalent figure for dealer financ-
ing is € 24,733 million (2014: € 22,025 million).
In the case of performance relationships underlying
non-derivative financial instruments, collateral will be
required, information on the credit-standing of the
counterparty obtained or historical data based on the
existing business relationship (i. e. payment patterns to
date) reviewed in order to minimise the credit risk, all
depending on the nature and amount of the exposure
that the BMW Group is proposing to enter into.
Within the financial services business, the financed items
(e. g.
vehicles, equipment and property) in the retail cus-
tomer and dealer lines of business serve as first-ranking
collateral with a recoverable value. Security is also put
up by customers in the form of collateral asset pledges,
asset assignment and first-ranking mortgages, supple-
mented where appropriate by warranties and guarantees.
If an item previously accepted as collateral is acquired,
it undergoes a multi-stage process of repossession and
disposal in accordance with the legal situation prevailing
in € million 31. 12. 2015 31. 12. 2014
Gains / losses on hedging instruments designated as part of a fair value hedge relationship – 269 369
Gains / losses from hedged items 276 – 359
Ineffectiveness of fair value hedges 7 10