PowerPoint for International Accounting

Analysis of BMW’s Annual Report

Introduction

Financial statements refer to collections of reports about the financial results of every organization, the economic conditions and the cash flow trends in the entity. BMW, just like any other entity, is on the forefront in reflecting transparency and increased the level of accountability towards its stakeholders. The financial report concerning BMW as an organization shows historical data and the transactions which have been embraced by the entity. This paper provides background information about BMW and the quality of financial reporting provided by the organization. A comparison of the GAAP to US GAAP. The United States standards and reporting tiles values and biases have also been presented, as well as a comparison of the same in Germany. Financial reporting is all about openness, responsibility, and accountability in the organizations, to maintain an ethical competition platform.

Quality of information provided by the company

Companies come out with reports which highlight their annual performance to the shareholders. In the case of BMW, the report provided is the primary source of intimation for any investor to be able it understand the organization, management and analyze the financials of the organization. Annual reports can be acquired from the group website under the investor relations section. BMW has managed to provide quality financial data based on ten significant aspects;

a) Vision and mission statements of the organization

In this section, you get to read the mission and vision statement of BMW. The comments provided are general in nature and help provide guidance on the objectives which are to be achieved.

b) Corporate information

BMW has provided the shareholders with details of all the directors, the bankers, and all auditors to the company. Board members can be easily analyzed, and auditors assessed by the investors.

c) Product Overview

The organization has provided financial highlights and the products which are manufactured by the entity, segment wise and performance wise over a period. Some organizations have the tendency of publishing financial highlights of five to ten years in their annual reports. This encourages easier analysis of revenues, earnings and the interest before tax. This ensures that one can get a glimpse of the assets, debtors, and liabilities in the organization. Financial ratios are also presented.

d) Director’s report

BMW financial record has provided a brief summary of the financials, the results and the explanation of all transactions made within the organization. The major elements of importance, in this case, include the operational parameters such as capacity additions and occupancy rates as well as production levels.

e) Management discussion and analysis

The section is keen to highlight the major trends in the industry, and the major elements which affect the operational effectiveness of the organization. This section analysis is the entity regarding its strengths, weaknesses, threats and opportunities, as well as the risk elements of concern affecting performance at BMW in Germany.

f) Corporate governance report

Insight has been provided on corporate governance and the composition of the board of directors. Important things to look at are the selection of the board of trustees, subcommittees and attendance are also provided.

Background information on BMW

BMW was formed as a business entity after the restructuring of the Rapp Motorenwerke aircraft in 1917. BMW was forced to cease aircraft engine production after the Second World War, and this led to the shift of the organization to motorcycle production. The first car to be produced by BMW is the BMW all, with a significant craft engine in 1918. The availability of German rearmament in 1930 provided adequate resources and labor for the organization.

By the year 1958, BMW had undergone a significant transformation in its automotive division and was in financial difficulties. Shareholders meeting were held to decide on whether liquidation is to be instituted, or an alternative needed to be sought. Since then, BMW has significantly prospered, and increased efficiency has led to the increased competitive edge of the entity in the automotive sector.

Comparison of German GAAP to US GAAP

The accepted accounting principles refer to the accounting standards which have been fully implemented in the United States. GAAP is more of a rule-based system. There are significant differences between the United States GAAP and the German GAAP. US GAAP makes use of the revenues, expenditures, and liabilities. In US GAAP, inventory reversals are made under specific criteria. In both countries, the principles are acceptable, while the main aim in the United States is to enhance standardization of the entire process. The German accounting sector is more of a rule-based industry as well but permits implementation of exceptions where the need arises.

US standards and reporting rules, values and biases

Reporting standards in the United States are extremely clear a compared to German standards and values which are emphasized concerning reporting standards. US GAAP has a minimal bias because organizations in Germany are keen to make profits. The United States accounting system requires that all entities comply with the rules and regulations set by the accounting body.

Comparison of US standards and reporting rules, values and biases to Germany

Different accounting systems are used both in the United States and Germany. However, the overall interpretation of the data obtained is similar which enhances the standardization of the global financial and accounting platform. In the United States, the accounting systems are influenced by social and economic factors. In Germany, social factors have the minimal impact of the accounting standards and their application. German GAAP and US GAAP have entirely different objectives. German accounting prioritizes more on carefully calculated profits, while the United States accounting system relies more on classifications and obtaining proper financial records.

Critique of bias regarding issues of reporting standards of Germany and the US standards

If CEOs do not portray high-level professionalism and accountability in their respective duties, especially in the provision of financial statements, financial records are bound to contain biases which are open to interpretation.

a) PR vs. Progress

Company executives want to portray their business activities in a positive way. The information described in the financial reports might be altered to suggest a good performance to cater for the interests of the executives.

b) Buried in the numbers

Investors get lost if the financial reports rely heavily on the charts, graphs, and mathematical presentations. Companies need to have simple and clear objectives to portray themselves as viable. Savvy investors might turn to more substantial income reports such as poor stock values.

c) Covered concerns

Bias could be noted if executives have diverted their interests from the future of the company. This is evident in both Germany and the United States, considering the high number of profit making institutions.

Conclusion

Currently, BMW has launched its smallest car, the 1 Series, the two series and the three series (Keith, 2007). The motorcycle industry is a fast developing segment and a large contributor to the economy. In 2015, the greatest breakthrough was when BMW launched its customer portal in the Australian market which included integrated access to the new services and application in the entity. BMW has received numerous sponsorships over the years. The financial transparency and accountability which has been reflected by the organization have contributed so much to its success and overwhelming productivity for an extended period. Financial statement provision and annual reports are a mandatory requirement (Giep, 2008). All profit making entities, primarily publicly traded entities should be provided such data to the interested users and stakeholders. Other businesses should emulate BMW’s accountability and responsibility in the manufacturing industry.

References

BMW Group. The Next 100 Years: Annual Report 2015. Bayerische Germany

Keith, H. (2007). Elements of Multinational Strategy. New York: Springer Science and Business Media

Giep, F. (2008). The Science and Art of Branding. Germany: M. E. Sharpe

Don, H. (2008). Organization Behavior. New York: John Wiley and Sons