Siemens 2005 Annual Report Download - page 208

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Similarly, decision-making regarding essential pension items is done centrally. As a conse-
quence, Group profit includes only amounts related to the service cost of pension plans, while all
other pension related costs (including charges for the German pension insurance association and
plan administration costs) are included in the line item Corporate items, pensions and elimina-
tions. Directly attributable service costs of domestic pension plans are allocated to the Groups.
Furthermore, income taxes are excluded from Group profit since tax expense is subject to legal
structures which typically do not correspond to the structure of the Operations Groups.
The Managing Board also determined Net capital employed as additional information to
assess the capital intensity of the Operations Groups. Its definition corresponds with the Group
profit measure. Net capital employed is based on total assets excluding intracompany financing
receivables and intracompany investments and tax related assets, as the corresponding positions
are excluded from Group profit (Asset-based adjustments). The remaining assets are reduced by
non-interest bearing liabilities other than tax related liabilities (e.g. accounts payable) and certain
accruals (Liability-based adjustments) to derive Net capital employed. The reconciliation of total
assets to Net capital employed is presented below.
Other Operations primarily refers to operating activities not associated with a Group such as
the former L&A divisions DI and MHP mentioned above and certain centrally-held equity invest-
ments (such as BSH Bosch und Siemens Hausgeräte GmbH), as well as in conjunction with acqui-
sitions recently purchased assets and asset groups for which the allocation to the Groups or their
objectives are not yet finalized but excluding the equity investment in Infineon, which is not con-
sidered under an operating perspective since Siemens intends to divest its remaining interest in
Infineon over time. In January 2004, the Company sold 150 million shares of Infineon (see Notes
5 and 9).
Reconciliation to financial statements
Reconciliation to financial statements includes items which are excluded from definition of
Group profit as well as costs of corporate headquarters.
Corporate items includes corporate charges such as personnel costs for corporate headquar-
ters, the results of corporate-related derivative activities, as well as corporate projects and non-
operating investments including, up to the second quarter of fiscal 2004, the Company’s share
of earnings (losses) from the equity investment in Infineon as well as goodwill impairment relat-
ed to L&A (see Note 14). Because the impaired businesses were acquired at the corporate level as
part of the Company’s Atecs Mannesmann transaction, the resulting goodwill impairment was
taken centrally. Pensions include the Company’s pension related income (expenses) not allocated
to the Groups. Eliminations represent the consolidation of transactions within the Operations
component.
Corporate items, pensions and eliminations in the column Group profit consists of:
Management’s discussion and analysis
Year ended
September 30,
2005 2004
Corporate items (537) (450)
Pensions (519) (729)
Eliminations (16) (27)
(1,072) (1,206)