Introduction of IAS / IFRS by the BMW AG in 2000

Bachelorarbeit von Johannes-Cornelius Adari, Henrik Thrane, Pascale Taube

Abstract:

This case study deals with an important financial aspect of multinational companies, i.e. their obligation of accounting. Until the year 2000, BMW used to prepare its annual external audits under German Commercial Code Standards (HGB). This tradition ended in 2000, when BMW accounted under „International Accounting Standards” (IAS) for the first time.

7 years before, Mercedes-Benz was the first German automotive manufacturer adopting international Standards in 1993. But in Mercedes’ case „US-Generally Accepted Accounting Principles” (US-GAAP) were chosen, because the objective was to become listed at the „New York Stock Exchange” (NYSE). At this time US-GAAP were not accepted outside the „North American Free Trade Association” (NAFTA), esp. not by the EU Commission, but the US-Principles were applied in the largest and most important stock market worldwide. On the other hand, US organizations like the „Securities and Exchange Commission” (SEC) did not accept any other accounting standards in these days. Accordingly, Mercedes-Benz had to prepare two annual audits: one under US-GAAP and the other under HGB.

This treatment, obviously, was highly inefficient, providing lots of encumbrances to US-capital-seeking European companies: accounting and auditing took too much time, personnel resources and money. Another negative effect was that many US companies hesitated with urgently required investments in Europe. But nevertheless, multinational groups seemed to have several advantages by using international accounting standards, even if they had to prepare more than one audit annually.

Within the 1st part, this case study provides basic information dealing with accounting standards, in particular reasons and objectives, organizational patterns and the process of IAS becoming international accepted by pointing out their most important differences compared to US-GAAP and German HGB Standards.

The 2nd part deals with the reasons of changing BMW’s accounting standards by looking at the Group’s key markets and the impact of IAS-adoption by examining their figures of non current assets, inventories, other current assets, liabilities & deferred incomes, provisions, equity as well as research & development within a four years comparison.

At last the 3rd part gives an examination and summary of the results of IAS-reception for BMW, the effects on the stock market, changes of rating on the global market and gives hints to future accounting trends in the Automotive sector.

Zusammenfassung:

Die vorliegende englischsprachige Projektarbeit behandelt das Thema internationale Rechnungslegung (international accounting) in der Automobilindustrie am Beispiel der BMW AG, die erstmals im Jahr 2000 die Rechnungslegung nach HGB auf International Accounting Standards (IAS) / International Financial Reporting Standards (IFRS) umstellte.

Ziel der Arbeit ist es, die Gründe, Ziele und die bilanziellen Auswirkungen des Systemwechsels von der nationalen hin zur internationalen Rechnungslegung am Beispiel von BMW herauszuarbeiten und zu bewerten.

Dazu wurde die Arbeit in 3 Teile untergliedert. Im Vorwort und im 1. Teil werden die allgemeinen Grundlagen der internationalen Rechnungslegung erläutert. Neben der IAS-/ IFRS-Begriffsdefinition, den Zielen und Erwartungen der IAS-/IFRS-Anwender im globalen Wettbewerb wird die Konkurrenz zu den US GAAP-Regeln anhand der historisch bedingten Unterschiede beider Wirtschaftssysteme untersucht, unter besonderer Berücksichtung der Rolle der amerikanischen Börsenaufsicht (US SEC). Dabei wird die Frage der Notwendigkeit eines europäischen Rechnungslegungssystems neben den nationalen Regelwerken beantwortet.

Anschließend werden die drei Entwicklungsphasen der IAS / IFRS herausgearbeitet, die Organisation der International Accounting Standards Committee Foundation und die Zusammenarbeit auf nationaler Ebene beleuchtet. Der 1. Teil schliesst ab mit einer Übersicht Im Anhang über die weltweite Anwendung der IAS- / IFRS-Rechnungslegung bis zum Jahr 2007.

Im 2. Teil werden die Gründe des Systemwechsels für BMW unter Berücksichtigung der Branche und Schlüsselmärkte dargestellt und die Auswirkungen der Umstellung auf die einzelnen Positionen innerhalb der Bilanz untersucht und bewertet.

Die Arbeit schliesst ab mit dem 3. Teil, wo die langfristigen Auswirkungen der Umstellung vom HGB auf das IAS-/ IFRS-System untersucht werden, insbesondere im Hinblick auf die Entwicklung der Aktienkurse und der Bewertungen durch internationale Rating-Agenturen.

Table of Contents:

	Preface: Accounting under different standards by multinational companies	4
1.	Introduction of International Accounting	6
1.1	Objectives of accounting standards and enforcement of IAS / IRFS	6
1.2	Reasons for using international standards	8
1.2.1	Globalization of economy and finance markets	8
1.2.2	Improved internal steering of multinational companies	11
1.3	Worldwide competition of Accounting Standards	12
1.3.1	Reasons for different accounting standards	12
1.3.2	Reasons for US SEC's reservation about accepting IAS / IFRS	13
1.3.3	Reasons for the creation of independent IAS / IFRS	13
1.3.4	Objectives of IAS / IFRS	14
1.3.5	Adoption of International Accepted Standards in Germany	15
1.4	The phases of development of IAS / IRFS	16
1.4.1	The early years of the IASC	17
1.4.2	The second phase of the IAS	17
1.4.3	The third and final phase	18
1.4.4	Conclusion	19
1.5	Organization of the IASC Foundation	20
1.5.1	Board of the IAS	21
1.5.2	Trustees	22
1.5.3	Standards Advisory Council (SAC)	23
1.5.4	The International Financial Reporting Interpretations Committee (IFRIC)	23
1.5.5	The standard-stetting process on national level	24
1.6	Summary and outlook	26
	Appendix: IAS / IFRS worldwide	27
2.	Short summery of BMW Group's history and activities	28
2.1	BMW Group's key markets	29
2.2	BMW's reasons of changing its accounting system	30
2.3	The effects of BMW Group changing accounting from HGB to IAS	31
2.4	Rules of propagating the BMW balance sheet under IAS	38
2.5	Some definitional, recognition and measurement requirements	40
2.6	BMW Group a 4 years comparison in euro million	44
3.	BMW and the IAS standards	46
3.1	The effects of the International Accounting Standards on BMW	48
3.3.1	Sales figures since 1998	51
3.3.2	Profit figures since 1998	52
3.3.3	Dividends since 1998	52
3.3.4	How does BMW rate	53
3.3.5	Investments and cash flow	56
3.4	Stock prices since 1998	57
3.5	Accounting standards in the automotive industry	59
3.6	Summing up and looking forward	60
	Bibliography	62