Siemens 2005 Annual Report Download - page 131

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Accounting under International Financial Reporting Standards (IFRS)
EU regulation regarding IFRS
The Regulation of the European Parliament and Council on the application of IFRS was adopted
in July 2002. In accordance with the Regulation publicly traded European Union companies are
required to prepare their consolidated financial statements in accordance with IFRS for fiscal
years commencing on or after January 1, 2005. However, Member States may defer mandatory
application of IFRS until 2007, for companies that either list debt securities only or which apply
internationally accepted standards other than IFRS due to a listing outside the European Union.
Accordingly, the latter particularly applies to companies listed on the New York Stock Exchange
(such as Siemens) and which prepare their consolidated financial statements under U.S. GAAP.
In Germany, the Bilanzrechtsreformgesetz (BilReG) implemented the option to defer mandatory
IFRS-application in October 2004. As a result, Siemens is required to prepare consolidated finan-
cial statements in accordance with IFRS in fiscal 2008 for the first time (fiscal year commencing
on October 1, 2007).
However, Siemens plans to prepare and publish IFRS financial statements as of and for the
two years ended September 30, 2006 as supplemental information early in fiscal 2007. At the
same time, those financial statements will serve as basis for Siemens’ IFRS reporting beginning
with the first quarter of fiscal 2007. Accordingly, Siemens’ opening IFRS balance sheet will be as
of October 1, 2004 (the date of transition).
Impact of differences between IFRS and U.S. GAAP
In September 2002, focusing on the 2005 IFRS adoption date in Europe, the International
Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB)
added a joint short-term convergence project to their agendas aimed at removing a number of
individual differences in the near-term. On a long-term basis, the IASB and the FASB are closely
collaborating to reduce or eliminate remaining differences through a series of joint projects and
through jointly coordinating future task force programs. The Boards also agreed to work together
through their respective interpretive bodies in converging interpretation and application issues.
Siemens supports further convergence of IFRS and U.S. GAAP. For that purpose, Siemens submits
comments on Exposure Drafts, makes recommendations on urgent accounting matters and par-
ticipates in field visits.
Although progress has been and is being made in considerably reducing differences between
the two sets of standards, significant differences remain at present, for example, pertaining to
the treatment of R&D costs, pension accounting, reversal of impairment losses, discounting of
provisions or goodwill impairment tests. The effects of such differences may vary by entity or
industry.
The adoption of IFRS is expected to have a limited impact on comparability or consistency of
Siemens’ financial reporting. Based on current U.S. GAAP and IFRS standards, differences with
a significant impact on our consolidated financial statements are expected to be limited and will
primarily relate to the following:
Management’s discussion and analysis
Consolidated Financial Statements Notes to Consolidated Financial Statements