Required: a. What is the percentage of capitalized costs at BMW and VW? b. BMW's net...

 

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Required: a. What is the percentage of capitalized costs at BMW and VW? b. BMW's net income in 2009 was €210 mil., while BMW's equity was €19,915 mil. How will BMW's net income, equity and ROE change if you assume that (ignore any effects on taxes): BMW capitalizes the same percentage of R&D outlays as VW? BMW expenses total R&D expenditure as incurred (instead of capitalizing and amortizing development)? BMW vs. Volkswagen in the crisis year 2009 BMW 2,448 1,361 1,087 1,226 Total R&D expenditure (cash) Expensed research costs Capitalized development costs Amortization of previously capitalized development costs This information is based on R&D disclosure in BMW's financial statements: 9 Cost of sales Cost of sales comprises: in euro million Manufacturing costs Research and development costs- Warranty expenditure - Cost of sales directly attributable to financial services Interest expense relating to financial services business Expense for risk provisions and write-downs for financial services business Other cost of sales Cost of sales adjusted as a result of the change in presentation of research and development costs Cost of sales include euro 14,281 million (2008: euro 13,997 million) relating to financial services business. Manufacturing costs do not contain any impairment losses on intangible assets and property, plant and equipment (2008: euro 3 million). Cost of sales is reduced by public- sector subsidies in the form of reduced taxes assets in euro million Research and development costs Amortisation New expenditure for capitalised development costs- Total research and development expenditure 2009 24,930 2,587 996 10,092 2,879 1,310 2,562 45,356 Volkswagen 5,790 3,843 1,947 1,586 2009 2008- and reduced consumption-based taxes amounting to euro 27 million (2008: euro 23 million). 2,587 -1,226 1,087 2,448 26,727 2,825 990 9,634 -2,666 -1,697 2,609 47,148 Total research and development expenditure comprising research costs, development costs not recognised as assets and capitalised development costs were as follows: 2008 2,825 -1,185 1,224 2,864 Q Required: a. What is the percentage of capitalized costs at BMW and VW? b. BMW's net income in 2009 was €210 mil., while BMW's equity was €19,915 mil. How will BMW's net income, equity and ROE change if you assume that (ignore any effects on taxes): BMW capitalizes the same percentage of R&D outlays as VW? BMW expenses total R&D expenditure as incurred (instead of capitalizing and amortizing development)? BMW vs. Volkswagen in the crisis year 2009 BMW 2,448 1,361 1,087 1,226 Total R&D expenditure (cash) Expensed research costs Capitalized development costs Amortization of previously capitalized development costs This information is based on R&D disclosure in BMW's financial statements: 9 Cost of sales Cost of sales comprises: in euro million Manufacturing costs Research and development costs- Warranty expenditure - Cost of sales directly attributable to financial services Interest expense relating to financial services business Expense for risk provisions and write-downs for financial services business Other cost of sales Cost of sales adjusted as a result of the change in presentation of research and development costs Cost of sales include euro 14,281 million (2008: euro 13,997 million) relating to financial services business. Manufacturing costs do not contain any impairment losses on intangible assets and property, plant and equipment (2008: euro 3 million). Cost of sales is reduced by public- sector subsidies in the form of reduced taxes assets in euro million Research and development costs Amortisation New expenditure for capitalised development costs- Total research and development expenditure 2009 24,930 2,587 996 10,092 2,879 1,310 2,562 45,356 Volkswagen 5,790 3,843 1,947 1,586 2009 2008- and reduced consumption-based taxes amounting to euro 27 million (2008: euro 23 million). 2,587 -1,226 1,087 2,448 26,727 2,825 990 9,634 -2,666 -1,697 2,609 47,148 Total research and development expenditure comprising research costs, development costs not recognised as assets and capitalised development costs were as follows: 2008 2,825 -1,185 1,224 2,864 Q

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a Percentage of capitalized costs BMW Capitalized development costs 1087 ... View the full answer