Siemens 2006 Annual Report Download - page 169

Notes to Consolidated Financial Statements
(in millions of €, except where otherwise stated and per share amounts) 165
The adoption of SFAS 123R, including the remeasurement to fair value of liability classified
awards, did not have a material effect on the Company’s Consolidated Financial Statements,
due primarily to the adoption of the fair value measurement provisions of SFAS 123 on Octo-
ber 1, 2003 for which the prospective method was applied. The following table illustrates the
effect on net income and earnings per share if the fair value based method of SFAS 123R had
been applied to all awards:
See Note 27 for further information on stock-based compensation.
In May 2005, the FASB issued SFAS 154, Accounting Changes and Error Corrections – a re-
placement of APB No. 20 and FASB Statement No. 3. This Statement changes the requirements
for the accounting for and reporting of a change in accounting principle. It applies to all vol-
untary changes in accounting principle, error corrections and required changes due to new
accounting pronouncements which do not specify a certain transition method. The Statement
generally requires retrospective application to prior periods’ financial statements for changes
in accounting principle, unless it is impracticable to determine either the period-specific
effects or the cumulative effect of the change. In addition, this Statement requires that retro-
spective application of a change in accounting principle be limited to the direct effects of the
change. It also requires that a change in depreciation, amortization, or depletion method for
long-lived, nonfinancial assets be accounted for on a prospective basis. The Company adopted
this Standard beginning October 1, 2005. The adoption of SFAS 154 did not have a material
impact on the Company’s Consolidated Financial Statements.
Accounting changes – Recent accounting pronouncements to be implemented – In
June 2005, the FASB ratified EITF Issue 05-5, Accounting for Early Retirement or Postemploy-
ment Programs with Specific Features (such as Terms Specified in Altersteilzeit Early Retire-
ment Arrangements). Altersteilzeit (ATZ) in Germany is an incentive and benefit program
towards early retirement. Companies are required to recognize the salary ratably over the
active service period. Accruals for Company-granted bonuses shall be recorded ratably from
the date the individual employee enrolls in the ATZ arrangement to the end of the active
service period. Related government subsidies are accounted for separately from the ATZ bene-
fits at the time the criteria to receive them are met. Siemens will adopt EITF 05-5 in the first
quarter of fiscal 2007. The adoption of EITF 05-5 is not expected to have a material impact on
the Company’s Consolidated Financial Statements.
Notes to Consolidated Financial Statements
Year ended
September 30,
2006 2005
Net income
As reported 3,033 2,248
Plus: Stock-based compensation expense included
in reported net income, net of income taxes 56 60
Less: Stock-based compensation expense determined
under fair value based accounting method, net of income taxes (51) (59)
Pro forma 3,038 2,249
Basic earnings per share
As reported 3.40 2.52
Pro forma 3.41 2.52
Diluted earnings per share
As reported 3.26 2.42
Pro forma 3.26 2.42