Based on the Note Disclosure Provided Below for BMW Group

question 60

Essay

Based on the note disclosure provided below for BMW Group, when would the following types of revenue be recognized?
a)Consignment sales of vehicles (Sales with repurchase commitments).
b)Financial services.
c)Lease rentals.
d)Post-sale services (Multiple-component contracts).
e)Sale of products.
Revenues from the sale of products are recognized when the risks and rewards of ownership of the goods are transferred to the customer, the sales price is agreed or determinable and receipt of payment can be assumed. Revenues are stated net of discounts, allowances, settlement discount and rebates. In the case of long-term construction work, revenues are generally recognized in accordance with IAS 18 (Revenue)and IAS 11 (Construction Contracts)on the basis of the stage of completion of work performed using the percentage of completion method. Revenues also include lease rentals and interest income from financial services. Revenues for the Financial Operations sub-group also include the interest income earned by Group financing companies.
If the sale of products includes a determinable amount for subsequent services ("multiple-component contracts")the related revenues are deferred and recognized as income over the period of the contract. Amounts are normally recognized as income by reference to the expected pattern of related expenditure.
Profits arising on the sale of vehicles for which a Group company retains a repurchase commitment (buy-back contracts)are not recognized until such profits have been realized. The vehicles are included in inventories and stated at cost.

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Definitions:

Cheques Presented

Refers to the cheques that have been submitted to a bank for payment and are pending clearance.

Money Market Account

A type of savings account that typically offers higher interest rates, with some restrictions on withdrawal.

Cash Surplus

The amount of cash that exceeds the cash needs of a company, indicating a positive financial state with excess liquidity.

Major Expenditure

A significant financial outlay, often relating to the purchase of fixed assets, long-term investments, or other large-scale business expenses.