BMW 2011 Annual Report Download - page 92

92
76 GROUP FINANCIAL STATEMENTS
76 Income Statements
76 Statement of
Comprehensive Income
78 Balance Sheets
80 Cash Flow Statements
82 Group Statement of Changes
in Equity
84 Notes
84 Accounting Principles
and Policies
100 Notes to the Income
Statement
107 Notes to the Statement
of Comprehensive Income
108
Notes to the Balance Sheet
129 Other Disclosures
145 Segment Information
recognised directly in equity until the financial asset is
disposed of or is determined to be impaired, at which
time the cumulative loss previously recognised in equity
is reclassified to profit or loss for the period.
With the exception of derivative financial instruments,
all receivables and other current assets relate to loans
and receivables which are not held for trading. All such
items are measured at amortised cost. Receivables with
maturities of over one year which bear no or a lower-
than-market interest rate are discounted. Appropriate
impairment losses are recognised to take account of all
identifiable risks.
Receivables from sales financing comprise receivables
from retail customer, dealer and lease financing.
Impairment losses on receivables relating to financial
services business are recognised using a uniform
methodology that is applied throughout the Group and
meets the requirements of IAS 39. This methodology
results in the recognition of impairment losses both on
individual assets and on groups of assets. If there is ob-
jective evidence of impairment, the BMW Group recog-
nises impairment losses on the basis of individual as-
sets. Within the customer retail business, the existence
of overdue balances or the incidence of similar events
in the past are examples of such objective evidence. In
the event of overdue receivables, impairment losses are
always recognised individually based on the length of
period of the arrears. In the case of dealer financing re-
ceivables, the allocation of the dealer to a correspond-
ing rating category is also deemed to represent objective
evidence of impairment. If there is no objective evidence
of impairment, impairment losses are recognised on
financial assets using a portfolio approach based on simi-
lar
groups of assets. Company-specific loss probabilities
and loss ratios, derived from historical data, are used to
measure impairment losses on similar groups of assets.
The recognition of impairment losses on receivables
relating to industrial business is also, as far as possible,
based on the same procedures applied to financial
services business.
Impairment losses (write-downs and allowances) on
receivables are always recorded on separate accounts
and derecognised at the same time the corresponding
receivables are dercognised.
Items are presented as financial assets to the extent that
they relate to financing transactions.
Derivative financial instruments are only used within
the BMW Group for hedging purposes in order to re-
duce currency, interest rate, fair value and market price
risks from operating activities and related financing re-
quirements. All derivative financial instruments (such
as interest, currency and combined interest / currency
swaps, forward currency and forward commodities con-
tracts) are measured in accordance with IAS 39 at their
fair value, irrespective of their purpose or the intention
for which they are held. The fair values of derivative
financial instruments are measured using market infor-
mation and recognised valuation techniques. In those
cases where hedge accounting is applied, changes in
fair value are recognised either in income or directly in
equity under accumulated other equity, depending
on whether the transactions are classified as fair value
hedges or cash flow hedges. In the case of fair value
hedges, the results of the fair value measurement of the
derivative financial instruments and the related hedged
items are recognised in the income statement. In the
case of fair value changes in cash flow hedges which are
used to mitigate the future cash flow risk on a recog-
nised asset or liability or on forecast transactions, unre-
alised gains and losses on the hedging instrument are
recognised initially directly in accumulated other equity.
Any such gains or losses are recognised subsequently
in the income statement when the hedged item (usually
external revenue) is recognised in the income statement.
The portion of the gains or losses from fair value meas-
urement not relating to the hedged item is recognised
immediately in the income statement. If, contrary to
the normal case within the BMW Group, hedge account-
ing cannot be applied, the gains or losses from the fair
value measurement of derivative financial instruments
are recognised immediately in the income statement.
In accordance with IAS 12 (Income Taxes), deferred taxes
are recognised on all temporary differences between the
tax and accounting bases of assets and liabilities and
on consolidation procedures. Deferred tax assets also
include claims to future tax reductions which arise from