BMW 2006 Annual Report Download - page 73

72 Group Financial Statements
[1]
65 Group Financial Statements
65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of
Changes in Equity
71 Statement of Income and
Expenses recognised directly
in Equity
72 Notes
72 – Accounting Principles
and Policies
79 – Notes to the Income Statement
86 – Notes to the Balance Sheet
104 – Other Disclosures
111 – Segment Information
BMW Group
Notes to the Group Financial Statements
Accounting Principles and Policies
Basis of preparation
The consolidated financial statements of Bayerische
Motoren Werke Aktiengesellschaft (“BMW Group
financial statements“ or “Group financial statements“)
at 31 December 2006 have been drawn up in accor-
dance with International Financial Reporting Standards
(IFRSs) as applicable in the EU. The designation
“IFRSs” also includes all valid International Accounting
Standards (IASs). All interpretations of the Interna-
tional Financial Reporting Interpretations Committee
(IFRIC) mandatory for the financial year 2006 are al-
so applied.
The Group financial statements comply in their
present form with provision §315a of the German
Commercial Code (HGB). This provision, in con-
junction with the Regulation (EC) No.1606/2002 of
the European Parliament and Council of19 July2002,
relating to the application of International Financial
Reporting Standards, provides the legal basis for
preparing consolidated financial statements in ac-
cordance with international standards in Germany
and applies to financial years beginning on or after
1 January 2005.
The BMW Group and sub-group income state-
ments are presented using the cost of sales method.
The Group balance sheet and sub-group balance
sheets correspond to the classification provisions
contained in IAS 1 (Presentation of Financial State-
ments). In order to improve clarity, various items are
aggregated in the income statement and balance
sheet. These items are disclosed and analysed sep-
arately in the Notes.
In order to support the sale of its products, the
BMW Group provides various financial services –
mainly loan and lease financing – to retail customers
and to dealers. The inclusion of the financial servic-
es activities of the Group therefore has an impact on
the Group financial statements. In order to provide
a better insight into the earnings, financial and net
assets position of the Group, additional information
has been presented in the BMW Group financial
statements on its industrial and financial operations.
Financial operations include financial services and
the activities of the Group financing companies.The
operating interest income and expense of Financial
operations are included in revenues and cost of
sales respectively. The holding companies BMW (UK)
Holdings Ltd., Bracknell, BMW Holding B.V., The
Hague, BMW Österreich Holding GmbH, Steyr, BMW
(US) Holding Corp., Wilmington, Del., BMW España
Finance S.L., Madrid, and BMW Holding Malaysia
Sdn Bhd, Kuala Lumpur, are allocated to Industrial
operations. The main business transactions between
Industrial and Financial operations, which are elimi-
nated in the Group financial statements, are internal
sales of products, the provision of funds for Group
companies and the related interest. These additional
disclosures allow the assets, liabilities, financial po-
sition and performance of Industrial operations and
Financial operations to be presented, in accordance
with the recognition and measurement principles
stipulated by IFRSs, as if they were two separate
groups. This information, which has not been audited
by the Group auditors, is provided on a voluntary
basis.
In conjunction with the refinancing of financial
services business, a significant volume of receivables
arising from retail customer and dealer financing is
sold. Similarly, rights and obligations relating to leases
are sold. The sale of receivables is a well established
instrument used by industrial companies. These
transactions are usually in the form of “asset backed
financing” transactions involving the sale of a port-
folio of receivables to a trust which, in turn, issues
marketable securities to refinance the purchase
price. The BMW Group continues to “service” the
receivables and receives an appropriate fee for these
services. In accordance with IAS 27 (Consolidated
and Separate Financial Statements) and the
inter-
pretation contained in SIC-12 (Consolidation –
Special Purpose Entities) such assets remain in the
Group financial statements although they have been
legally sold. Gains and losses relating to the sale of
such assets are not recognised until the assets are
removed from the group balance sheet on transfer
of the related significant risks and rewards. The bal-
ance sheet value of the assets sold at 31 December
2006 totalled euro 4.5 billion (31 December 2005:
euro 3.9 billion). For an additional understanding of
the asset, liability and financial position of the BMW
Group, the Group balance sheet contains a
supple-
mentary disclosure of thebalance sheet total adjusted
for assets which have been sold.
The Group currency is the euro. All amounts are
disclosed in millions of euros (euro million) unless
stated otherwise.
The Group Financial Statements, drawn up in
accordance with §315aHGB,and the Group Manage-
ment Report for the financial year 2006 will be sub-
mitted to the operator of the electronic version of
the German Federal Gazette and can be obtained
via the Company Register website. Printed copies
will also be made available on request. In addition
the Group Financial Statements and the Group
Management Report can be downloaded from the
BMW Group website at www.bmwgroup.com/ir.