BMW 2009 Annual Report Download - page 85

83 Group Financial Statements
E. F. C., S. A., Madrid, was merged with BMW Bank GmbH,
Munich, and therefore also ceased to be a consolidated
company. The companies Rover South Africa (Pty)
Ltd., Cape Town, and Sociedade Anglo-Portugese de
Automoveis Sarl, Lisbon, also ceased to be consolidated
companies.
LHS Leasing- und Handelsgesellschaft Deutschland mbH,
Stuttgart, changed its name to Alphabet Fuhrparkmanage-
ment GmbH, Munich.
The BMW Group reporting entity also changed by
com-
parison to the previous year as a result of the first-time
consolidation of five special purpose trusts and the de-
consolidation of six special purpose securities funds and
one
special purpose trust.
The changes are not material because the resulting impact
on the Group Financial Statements would not influence
the economic decisions of users taken on the basis of the
financial statements.
3 Business acquisitions
With effect from 1 January 2009, BMW Anlagen
Verwal-
tungs GmbH, Munich, acquired all of the shares of LARGUS
Grundstücks-Verwaltungsgesellschaft, Grünwald, and, in-
directly, 94.5 % of the shares of that company’s subsidiary,
LARGUS Grundstücks-Verwaltungsgesellschaft mbH &
Co. KG, Grünwald. The acquisition of LARGUS Grund-
stücks-Verwaltungsgesellschaft mbH & Co. KG, Grünwald,
gave rise to a credit difference on consolidation (excess
of fair value of acquired net assets over purchase price) of
euro 2 million which was recognised as other operating
income in the first quarter 2009.
Consolidation principles
The equity of subsidiaries is consolidated in accordance
with IFRS 3 (Business Combinations). IFRS 3 requires
that all business combinations are accounted for using the
purchase method with identifiable assets and liabilities
acquired measured initially at their fair value. The excess of
the Group’s interest in the net fair value of the identifiable
assets and liabilities acquired over cost is recognised as
goodwill and is subjected to a regular review for impairment.
Goodwill of euro 91 million which arose prior to 1 January
1995 remains netted against reserves. The companies
LARGUS Grundstücks-Verwaltungsgesellschaft mbH,
Grünwald, LARGUS Grundstücks-Ver wal tungs gesell-
schaft
mbH & Co. KG, Grünwald, BMW Polska Sp. z o.o.,
Warsaw, and BMW India Private Limited, New Delhi, were
consolidated for the first time with effect from 1 January
2009. The equivalent date for BMW Extended Services
Corporation, Hilliard, was 1 October 2009.
Receivables, liabilities, provisions, income and expenses
and profits between consolidated companies (intragroup
profits) are eliminated on consolidation.
Under the equity method, investments are measured at
the BMW Group’s share of equity taking account of fair
value adjustments on acquisition, based on the Group’s
shareholding. Any difference between the cost of invest-
ment and the Group’s share of equity is accounted for
in accordance with the purchase method. Investments in
other companies are accounted for as a general rule
using the equity method when significant influence can
be
exercised (IAS 28, Investments in Associates). This is
normally the case when voting rights of between 20 %
and
50 % are held (associated companies).
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Foreign currency translation
The financial statements of consolidated companies
which are drawn up in a foreign currency are translated us-
ing the functional currency concept (IAS 21, The Effects
of Changes in Foreign Exchange Rates) and the modified
closing rate method. The functional currency of a sub-
sidiary is determined as a general rule of the basis on the
primary economic environment in which it operates and
corresponds therefore to the relevant local currency. In-
come and expenses of foreign subsidiaries are translated in
the Group Financial Statements at the average exchange
rate for the year, and assets and liabilities are translated at
the closing rate. Exchange differences arising from the
translation of shareholders’ equity are offset directly
against accumulated other equity. Exchange differences
arising from the use of different exchange rates to trans-
late the income statement are also offset directly
against
accumulated other equity.
Foreign currency receivables and payables in the single
entity accounts of BMW AG and subsidiaries are recorded,
at the date of the transaction, at cost. Exchange gains and
losses computed at the balance sheet date are recognised
as income or expense.
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