BMW 2002 Annual Report Download - page 96

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In accordance with internal guidelines, the nominal
amounts correspond to the volume of hedged items.
The disclosed fair values of derivative financial
instruments, based on their nominal values, do not
take account of any compensating changes in the
value of the underlying transaction. Moreover, the
fair values disclosed do not necessarily correspond
to the amounts which the BMW Group will realise in
the future under the market conditions prevailing at
that time.
At 31 December 2002, the positive impact from
the fair value measurement of financial instruments
(net of deferred taxes) recognised directly in equity
amounted to euro 709 million (2001: negative im-
pact of euro 819 million). This comprises a positive
impact from cash flow hedges of euro 1,023 million
(2001: negative impact of euro 704
million) and a
negative impact from available-for-sale securities
of euro 314 million (2001: euro 115 million). During
the year under report, positive changes in fair values
amounting to euro 1,528 million (2001: negative
changes in fair values of euro 77 million) were re-
cognised directly in equity. Of this amount euro
1,727 million (2001: euro15 million) relate to
positive
effects from cash flow hedges and euro
199 million
(2001: euro 92 million) relate to negative effects from
available-for-sale securities.
In 2002, the negative fair values on financial
instruments relating to hedged forecasted trans-
actions decreased by euro 161 million (2001: euro
428 million). This amount was included in accumu-
lated other equity and relates to underlying trans-
The cash flow statements show how the cash and
cash equivalents of the BMW Group, industrial oper-
ations and financial operations have changed in the
course of the year as a result of cash inflows and
outflows. In accordance with IAS 7(Cash Flow
State-
actions which were realised during the year. As a
result of the situation on the capital markets, impair-
ment losses of euro 22 million (2001: euro  million)
on available-for-sale securities were recognised as
expenses.
Credit risk
Financial assets are recognised in the balance sheet
net of write-downs for the risk that counter-parties
are unable to fulfil their contractual obligations, irre-
spective of the value of collateral received. In the
case of all performance relationships which underlie
non-derivative financial instruments, collateral is
required, information on the credit-standing of the
counter-party obtained or historical data based on
the existing business relationship (i.e. payment
patterns to date) reviewed in order to minimise the
credit risk. The nature and extent depends on the
type and amount of the relevant transaction. Write-
downs are recorded as soon as credit risks are iden-
tified on individual financial assets. In the case of
derivative financial instruments, the Group is also
exposed to a credit risk which results from the non-
performance of contractual agreements on the part
of the contract party. This credit risk is minimised by
the fact that the Group only enters into such con-
tracts with parties of first-class credit standing.The
general credit risk on derivative financial instru-
ments utilised by the BMW Group is therefore not
considered to be significant. A concentration of
credit risk with particular borrowers or groups of bor-
rowers has not been identified.
ments), cash flows are classified into cash flows from
operating, investing and financing activities.
Cash and cash equivalents included in the cash
flow statement comprise cash in hand, cheques,
deposits at the Federal Bank and cash at bank, to
[37]Explanatory notes
to the cash flow
statements