Siemens 2005 Annual Report Download - page 92

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Basis of presentation
To help shareholders understand and follow our progress, we present our financial results in
aggregate and also break out the major components. The sum of results for the components
equals the result for Siemens as a whole.
The majority of our business is devoted to providing products and services to customers based
on Siemens’ historical expertise in innovative electrical engineering. We call this component of
our business Operations. The Groups in Operations design, manufacture, market, sell, and
service products and systems, or help customers use and manage those products and systems.
A Group is equivalent to a reportable segment as defined by United States Generally Accepted
Accounting Principles (U.S. GAAP).
We measure the performance of these Groups using Group profit, which is earnings before
centrally managed items including income taxes, financing costs, and certain pension costs.
For additional information with respect to Group profit, see “Notes to Consolidated Financial
Statements.”
As a result of changes in the Company’s management approach, various modifications were
made to the Groups. Information and Communication Networks (ICN) and Information and
Communication Mobile (ICM), previously separate Groups, were combined to form one Group
named Com as of October 1, 2004. As discussed in our “Notes to Consolidated Financial State-
ments,” Com’s mobile devices business is reported as discontinued operations and therefore
excluded from Com’s results. The earlier L&A divisions Distribution and Industry Logistics, as
well as Material Handling Products were reclassified to Other Operations as of September 30,
2005. Prior year information has been recast into the new structure for purposes of comparison.
Another component of our Company is made up of two Groups involved in non-manufactur-
ing activities such as financing, leasing, investing and real estate. We call this component of our
business Financing and Real Estate. We evaluate the profitability of our Financing and Real Estate
Groups using income before income taxes.
In breaking out the Operations and Financing and Real Estate components and in order to
show more clearly our external performance, we exclude the business they conduct with each
other and with our Corporate Treasury department, which provides cash management services
for our Groups and corporate finance activities. These internal transactions are therefore includ-
ed into a component called Eliminations, reclassifications and Corporate Treasury. This compo-
nent is the difference between the results for Operations and Financing and Real Estate and the
results of Siemens.
For additional information, see “Notes to Consolidated Financial Statements.”
Management’s discussion and analysis
Basis of presentation