Business – German rules cost Rover #230m

BMW’s harsh accounting policies have cost Rover more than #230m since 1994 and have placed the British car maker’s future in jeopardy, an Accountancy Age analysis has revealed.

Rover Group accounts filed at Companies House using British accounting rules show Rover made a #147m profit between 1994 and 1997, rather than the #363m loss shown in BMW’s consolidated accounts.

But, while the British figures have been kept out of the public eye, the huge German loss figures have been used to batter Rover’s reputation.

The losses also led to the recent BMW boardroom crisis. Experts say BMW’s accounting policies have helped turn once profitable Rover into a ‘lame duck’.

Professor Garel Rhys, Cardiff University car industry specialist, said customers did not want to be associated with Rover’s image as a troubled lossmaker, and that much of the problem boiled down to accountancy practice.

The harsh rules imposed by BMW include the rapid depreciation of assets, which in Rover’s case have led to massive losses. Rhys said: ‘The depreciation rate is important in terms of showing performance in the market. BMW, and indeed most German companies, depreciate at around twice the rate of the UK.’

BMW plans to move to less conservative international accounting standards. But Rhys said a switch would not be enough to turn Rover’s 1998 losses into profits.

Related reading