Siemens 2006 Annual Report Download - page 106

Management’s discussion and analysis
102
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 com-
ponent 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 the Groups in Operations 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 Consoli-
dated Financial Statements.”
As a result of changes in the Company’s management approach, various modifications were
made to the Groups. Based on a decision of the Managing Board in the fourth quarter of fiscal
2005, L&A was dissolved effective October 1, 2005. The Airport Logistics division and Postal
Automation division were transferred to I&S and the Electronics Assembly Systems division
was transferred to A&D. In addition, following an intensive analysis by the Managing Board
associated with the strategic reorientation of Com’s operations, the division Siemens Home
and Office Communication Devices was reclassified from Com to Other Operations during fis-
cal 2006. Prior-year information was reclassified for comparability purposes. Com’s Mobile
Devices business is reported as discontinued operations and therefore excluded from Com’s
results.
Another component of our Company is made up of two Groups involved in non-manufac-
turing 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
included into a component called Eliminations, reclassifications and Corporate Treasury. This
component 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.”