BMW Group and Daimler Company: Accounting Policies

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Accounting policies and methods used by BMW Group and Daimler

BMW Group and the Daimler companies use revenue and expenses recognition-revenue where the customer receives the goods and expenses recognized as soon as they are incurred (BMW Group, 2020; Daimler AG, 2021). Furthermore, inventories of goods for resale, supply, and raw materials are expressed in a lower price and the net value of realizable (BMW Group, 2020; Daimler AG, 2021). Direct material and manufacturing expenses, comprising devaluation for industrial purposes, measure unfinished and finished goods in both companies (BMW Group, 2020; Daimler AG, 2021). The two companies also value estimated receivables and other holdings lower than their net or nominal realizable values (BMW Group, 2020; Daimler AG, 2021). BMW Group and Daimler companies use receivables whose payment is linked to specific concerns by writing them down properly (BMW Group, 2020; Daimler AG, 2021).

Acquired assets that are intangible are estimated at their purchase price by both the two companies (BMW Group, 2020; Daimler AG, 2021). Furthermore, both companies’ intangible assets with finite useful lives are amortized directly over their useful lives. Investments in subsidiaries and participation of the two companies are measured at cost or, if less, at their reasonable market worth. If the circumstances for depreciation ceases to operate, prerecorded depreciation damages are undone, up to the current value threshold. Debt that have no or a low rate of interest are reduced to their current value (BMW Group, 2020; Daimler AG, 2021). The companies’ expenses are matched accordingly with the revenues in the same accounting period that they have been incurred.

However, there are significant disparities in the two companies’ accounting policies to prepare their financial statements. The notion of good managerial judgment is used to compute tax provisions by BMW Group (BMW Group, 2020). Other remedies have been acknowledged to compensate for all hazards that have been detected (BMW Group, 2020). Requirements are calculated based on the amount of money paid out if the claim is successful (BMW Group, 2020). In the situation of out-of-the-ordinary arrangements, the sums are evaluated by applying the median real rate of interest that correlates to the entire period of the provision. The evaluations are computed and reported by the German Bundesbank (BMW Group, 2020). Deferred tax payments are determined using temporary variations in liability, prepayments, and assets between the tax base and HGB financial analysis, as well as a tax loss, carryforwards by the Daimler Company (Daimler AG, 2021). Tax-loss carryforwards can only be used if they can be used to balance earnings during the five-year statutory term.

Common Size Income Statements and Balance Sheets for BMW Group

BMW Group Common Size Income Statements (BMW Group, 2020). For the years ended 2020, 2019 and 2018.

in € million 2020(%) 2019(%) 2018(%)
Revenues 100 100 100
Cost of sales – 84.92 – 82.86 – 81.48
Gross profit 14.94 17.14 18.52
Selling expenses – 5.37 – 4.70 – 5.20
Administrative expenses – 3.67 – 3.28 – 3.58
Research and development expenses – 7.19 – 6.53 – 7.48
Other operating income 1.65 1.53 2.79
Other operating expenses –1.67 – 2.98 –1.48
Result on investments 4.11 2.19 2.99
Financial result – 0.37 0.05 –1.85
Income taxes – 214 – 767 – 872
Profit after income tax 1,720 2,129 2,820
Other taxes –0.02 – 0.03 –0.02
Net profit 2.27 2.49 3.57
Transfer to revenue reserves – 0.60 – 0.54 – 0.64
Unappropriated profit available for distribution 1.67 1.94 2.94

BMW Group Common Size Balance Sheet (BMW Group, 2020). As at 31st December (2018 – 2020).

in € million 2020(%) 2019(%) 2018(%)
ASSETS
Intangible assets 0.85 0.73 0.55
Property, plant, and equipment 21.72 22.35 26.30
Investments 6.64 6.74 7.81
Tangible, intangible, and investment assets 29.2 29.81 34.67
Inventories 9.97 10.73 10.57
Trade receivables 1.35 1.73 2.08
Receivables from subsidiaries 32.86 29.91 18.82
Other receivables and other assets 6.68 6.29 7.90
Marketable securities 5.79 7.36 8.96
Cash and cash equivalents 11.84 12.11 14.37
Current assets 68.48 68.14 62.69
Prepaid expenses 0.13 0.10 1.17
Surplus of pension and similar plan assets over liabilities 2.19 1.95 1.47
Total assets 100 100 100
in € million 2020(%) 2019(%) 2018(%)
EQUITY AND LIABILITIES
Subscribed capital 1.15 1.18 1.45
Capital reserves 3.88 3.96 4.78
Revenue reserves 19.11 18.93 22.19
Unappropriated profit available for distribution 2.17 2.95 5.06
Equity 26.31 27.01 33.47
Registered profit-sharing certificates 0.05 0.05 0.06
Pension provisions 0.40 0.37 0.47
Other provisions 17.51 15.74 17.18
Provisions 17.90 16.10 17.65
Liabilities to banks 0.18 0.92 1.20
Trade payables 8.30 10.30 12.21
Liabilities to subsidiaries 40.60 39.01 27.82
Other liabilities 0.38 0.33 0.63
Liabilities 0.49 50.57 41.86
Deferred income 6.27 6.26 6.96
Total equity and liabilities 100 100 100

Comparison between the Financial Conditions of BMW Group and Daimler Company

The two firms, Daimler and BMW Group, are primarily one of the world’s leading automakers. They are, nevertheless, distinct in one way or another in terms of their marketplace, capital position, administration, and financial sector effectiveness. The accompanying is comparisons between the two firms based on several criteria. First, concerning material sales, Daimler has outperformed BMW Group over the last three years. This performance can be attributed to many factors, including Daimler’s exceptional client satisfaction, which contributes to replicating car sales. The company’s proactive marketing strategy includes all art methods, the availability of a broader range of affordable automobiles than the BMW Group, and the use of lean administration in their production line. Daimler has a higher market share than BMW Group, as evidenced by the large volume of sales.

Second, Daimler has a higher cost ratio than BMW, indicating that the investors are ready to shell more for Daimler’s ongoing and prospective revenues. Third, the two companies saw a reduction in income in 2020 (BMW Group, 2020). It is projected that this trend will continue in 2021, as it has for many other companies worldwide due to the current pandemic’s consequences (BMW Group, 2020, Daimler AG, 2021). Many companies worldwide have been damaged by the covid-19 epidemic, requiring them to alter their operations. Daimler had a dividend yield of 40% in 2020, contrasted to 47% for BMW (BMW Group, 2020, Daimler AG, 2021). The financial report by Daimler AG suggests that Daimler kept a significant portion of its income to reinvest in its activities and development. Therefore, if a dividend investor is looking for a company to invest in, BMW is a good choice since shareholders will obtain higher dividends.

Furthermore, in terms of the administration of the two companies, it can be deduced that the management of both organizations is concerned with high profit and excellent performance. The exceptional performance is attributed to the fact that the two businesses are reasonably profitable, as seen by their financial reports. Lastly, focusing on both companies’ profitability, it is apparent that they are highly leveraged and viable. As a result, it is projected that they will remain in operation in the future for an undetermined length of time if they continue to make progress as they have over the previous three years. Nonetheless, the administration should devise effective implementation strategies to ensure that the enterprises are not affected by the epidemic.

References

BMW Group (2020). Financial Statements of BMW AG: Financial Year 2020. Bmw Group. Web.

Daimler AG. (2021). Daimler AG Annual Financial Statements. Daimler. Web.‌

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BusinessEssay. (2023) 'BMW Group and Daimler Company: Accounting Policies'. 11 January.

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BusinessEssay. 2023. "BMW Group and Daimler Company: Accounting Policies." January 11, 2023. https://business-essay.com/bmw-group-and-daimler-company-accounting-policies/.

1. BusinessEssay. "BMW Group and Daimler Company: Accounting Policies." January 11, 2023. https://business-essay.com/bmw-group-and-daimler-company-accounting-policies/.


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BusinessEssay. "BMW Group and Daimler Company: Accounting Policies." January 11, 2023. https://business-essay.com/bmw-group-and-daimler-company-accounting-policies/.