Siemens 2005 Annual Report Download - page 207

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30 Segment information
As of fiscal 2005, the Company has fourteen reportable segments referred to as Groups reported
among the components used in Siemens’ financial statement presentation as described in Note 1.
The Groups are organized based on the nature of products and services provided.
Within the Operations component, Siemens has twelve Groups which involve manufacturing,
industrial and commercial goods, solutions and services in areas more or less related to Siemens
origins in the electrical business. Also included in Operations are operating activities not associ-
ated with a Group, which are reported under Other Operations, as well as other reconciling items
discussed in Reconciliation to financial statements below.
As a result of changes in the Company’s management approach, various modifications were
made to the Groups. Information and Communication Network (ICN) and Information and Com-
munication Mobile (ICM), previously separate Groups, were combined to one Group named Com
as of October 1, 2004. Following an intensive analysis by the Managing Board, the Company
announced in the fourth quarter of fiscal 2005, the carve-out of the Distribution and Industry
Logistics as well as of the Material Handling Products divisions of L&A into a separate legal entity,
named Dematic. These activities have been retroactively reported in Other Operations for the
periods presented.
As discussed in Note 3, Com’s MD business is reported as discontinued operations. Current
and prior year Segment disclosure excludes the applicable information included in the Compa-
ny’s financial statement presentation.
The Financing and Real Estate component includes the Groups SFS and SRE. The Elimina-
tions, reclassifications and Corporate Treasury component separately reports the consolida-
tion of transactions among Operations and Financing and Real Estate, as well as certain reclas-
sifications and the activities of the Company’s Corporate Treasury.
The accounting policies of these components, as well as the Groups included, are generally the
same as those used for Siemens and are described in Note 2 Summary of significant accounting
policies. Corporate overhead is generally not allocated to segments. Intersegment transactions
are generally based on market prices.
New orders are determined principally as the estimated sales value of accepted purchase
orders and order value changes and adjustments, excluding letters of intent.
Operations
The Managing Board is responsible for assessing the performance of the Operations Groups. The
Company’s profitability measure for its Operations Groups is earnings before financing interest,
certain pension costs, and income taxes (Group profit) as determined by the Managing Board as
the chief operating decision maker (see discussion below). Group profit excludes various cate-
gories of items which are not allocated to the Groups since the Managing Board does not regard
such items as indicative of the Groups’ performance. Group profit represents a performance
measure focused on operational success excluding the effects of capital market financing issues.
Financing interest is any interest income or expense other than interest income related to
receivables from customers, from cash allocated to the Groups and interest expense on payables
to suppliers. Financing interest is excluded from Group profit because decision-making regard-
ing financing is typically made centrally by Corporate Treasury.
Notes to Consolidated Financial Statements
Consolidated Financial Statements Notes to Consolidated Financial Statements
(in millions of €, except where otherwise stated
and per share amounts)