BMW 2015 Annual Report Download - page 106

106
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 meth-
odology 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 objective
evi-
dence of impairment, the BMW Group recognises im-
pairment losses on the basis of individual assets. Within
the retail customer 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
rec-
ognised individually based on the length of period of
the arrears. In the case of dealer financing receivables,
the allocation of the dealer to a corresponding rating
category is also deemed to represent objective evidence
of impairment. If there is no objective evidence of im-
pairment, impairment losses are recognised on financial
assets using a portfolio approach based on similar 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 ser-
vices 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 derecognised.
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 reduce
currency, interest rate, fair value and market price risks
from operating activities and related financing require-
ments.
All derivative financial instruments (such as interest,
currency and combined interest / currency swaps, for-
ward
currency and forward commodity contracts) are
measured in accordance with IAS 39 at their fair value,
irrespective of their purpose or the intention for which
they are held.
If there are no quoted prices on active markets for deriva-
tive
financial instruments, credit risk is taken into ac-
count as an adjustment to the fair value of the financial
instrument. The BMW Group applies the option of
measuring the credit risk for a group of financial assets
and financial liabilities on the basis of its net exposure.
Portfolio-based value adjustments to the individual finan-
cial
assets and financial liabilities are allocated using the
relative fair value approach (net method).
The fair values of the derivative financial instruments
are measured using market information and recognised
valuation techniques. In those cases where hedge ac-
counting is applied, changes in fair value are recognised
either in profit or loss or in other comprehensive in-
come as a component of accumulated other equity, de-
pending 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 recognised asset or liability or on forecast transactions,
unrealised gains and losses on the hedging instrument
are recognised initially directly in accumulated other
equity. Any such gains or losses are recognised subse-
quently in the income statement when the hedged
item (usually external revenue) is recognised in the in-
come statement. The portion of the gains or losses from
fair value measurement not relating to the hedged
item is recognised immediately in the income statement.
If, contrary to the normal case within the BMW Group,
hedge accounting cannot be applied, the gains or losses
from the fair value measurement of derivative finan-
cial instruments are recognised immediately in the in-
come
statement.
In accordance with IAS 12 (Income Taxes), deferred
taxes are recognised on all temporary differences be-
tween the tax and accounting bases of assets and
lia-
bilities and on consolidation procedures. Deferred
90 GROUP FINANCIAL STATEMENTS
90 Income Statements
90 Statement of
Comprehensive Income
92 Balance Sheets
94 Cash Flow Statements
96 Group Statement of Changes in
Equity
98 Notes
98 Accounting Principles and
Policies
113 Notes to the Income Statement
121 Notes to the Statement
of Comprehensive Income
122
Notes to the Balance Sheet
147 Other Disclosures
163 Segment Information