Siemens 2005 Annual Report Download - page 195

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24 Commitments and contingencies
Guarantees and other commitments
The following table presents the undiscounted amount of maximum potential future payments
for each major group of guarantee:
Credit guarantees cover the financial obligations of third parties in cases where Siemens is the
vendor and/or contractual partner. These guarantees generally provide that in the event of default
or non-payment by the primary debtor, Siemens will be required to pay such financial obliga-
tions. In addition, Siemens provides credit guarantees generally as credit-line guarantees with
variable utilization to associated and related companies. The maximum amount of these guaran-
tees is subject to the outstanding balance of the credit or, in case where a credit line is subject to
variable utilization, the nominal amount of the credit line. These guarantees usually have terms
of between one year and five years. Except for statutory recourse provisions against the primary
debtor, credit guarantees are generally not subject to additional contractual recourse provisions.
As of September 30, 2005 and 2004, the Company has accrued €36 and €82, respectively, relating
to credit guarantees.
Furthermore, Siemens issues Guarantees of third-party performance, which include perform-
ance bonds and guarantees of advanced payments in cases where Siemens is the general or sub-
sidiary partner in a consortium. In the event of non-fulfillment of contractual obligations by the
consortium partner(s), Siemens will be required to pay up to an agreed-upon maximum amount.
These agreements span the term of the contract, typically ranging from three months to seven
years. Generally, consortium agreements provide for fallback guarantees as a recourse provision
among the consortium partners. No significant liability has been recognized in connection with
these guarantees.
Other guarantees include indemnifications issued in connection with dispositions of business
entities. Such indemnifications protect the buyer from tax, legal and other risks related to the
purchased business entity. As of September 30, 2005 and 2004, the total accruals for Other guar-
antees amounted to €106 and €156, respectively.
As of September 30, 2005, future payment obligations under non-cancellable operating leases
are 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)
September 30,
2005 2004
Guarantees
Credit guarantees 362 341
Guarantees of third-party performance 829 370
Other guarantees 602 525
1,793 1,236
2006 628
2007 515
2008 409
2009 299
2010 247
Thereafter 583