Siemens 2005 Annual Report Download - page 147

147
The Company’s presentation of Operations, Financing and Real Estate and Corporate
Treasury reflects the management of these components as distinctly different business activi-
ties, with different goals and requirements. Management believes that this presentation provides
a clearer understanding of the components of the Company’s financial position, results of opera-
tions and cash flows. The accounting principles applied to these components are generally the
same as those used for Siemens. The Company has allocated shareholders’ equity to the Financ-
ing and Real Estate business based on a management approach which takes into consideration
the inherent risk evident in the underlying assets. The remaining amount of total shareholders’
equity is shown under Operations. Income taxes are allocated to Eliminations, reclassifica-
tions and Corporate Treasury, Operations and Financing and Real Estate by applying the
effective tax rate of Siemens to the income before income taxes of each respective component.
Deferred income tax assets and liabilities are allocated to these components based on available
component specific information and applicable proportions of such amounts to total assets and
liabilities of Siemens. The financial data presented for the Operations and Financing and Real
Estate and Eliminations, reclassifications and Corporate Treasury components are not
intended to purport the financial position, results of operations and cash flows as if they were
separate entities under U.S. GAAP.
The information disclosed in these Notes relates to Siemens unless otherwise stated.
2 Summary of significant accounting policies
Basis of consolidation – The Consolidated Financial Statements include the accounts of Siemens
AG and subsidiaries which are directly or indirectly controlled. Additionally, the Company consol-
idates variable interest entities (VIE’s) for which it is deemed to be the primary beneficiary.
Results of associated companies – companies in which Siemens has the ability to exercise signifi-
cant influence over operating and financial policies (generally through direct or indirect owner-
ship of 20% to 50% of the voting rights) – are recorded in the Consolidated Financial Statements
using the equity method of accounting.
A list of Siemens’ subsidiaries and associated companies is being filed with the Commercial
Registries of the Berlin-Charlottenburg and Munich District Courts.
Foreign currency translation – The assets and liabilities of foreign subsidiaries, where the
functional currency is other than the euro, are translated using period-end exchange rates, while
the statements of operations are translated using average exchange rates during the period. Dif-
ferences arising from such translations are included as a separate component of shareholders’
equity.
The exchange rates of the significant currencies of non-euro countries used in the preparation
of the Consolidated Financial Statements were as follows:
Notes to Consolidated Financial Statements
Consolidated Financial Statements Notes to Consolidated Financial Statements
(in millions of €, except where otherwise stated
and per share amounts)
Year-end exchange Annual average rate
rate 1 € quoted into 1 € quoted into
currencies specified currencies specified
below below
September 30, Fiscal year
Currency ISO Code 2005 2004 2005 2004
Swiss francs CHF 1.556 1.554 1.542 1.549
British pound GBP 0.682 0.686 0.688 0.680
U.S. Dollar USD 1.204 1.233 1.273 1.215