Siemens 2006 Annual Report Download - page 210

Notes to Consolidated Financial Statements
(in millions of €, except where otherwise stated and per share amounts)
206
Other guarantees include indemnifications issued in connection with dispositions of busi-
ness entities. Such indemnifications protect the buyer from tax, legal and other risks related to
the purchased business entity. As of September 30, 2006 and 2005, the total accruals for Other
guarantees amounted to €103 and €106, respectively.
As of September 30, 2006, future payment obligations under non-cancellable operating
leases are as follows:
Total operating rental expense for the years ended September 30, 2006 and 2005 was €875
and €836, respectively.
As of September 30, 2006 and 2005, the Company has commitments to make capital con-
tributions of €173 and €148, respectively, to other companies.
The Company is jointly and severally liable and has capital contribution obligations as a
partner in companies formed under the German Civil Code (BGB), through which it has exe-
cuted profit-and-loss transfer agreements with other companies as a partner in commercial
partnerships and in a European Economic Interest Grouping (EEIG) and as a participant in
various consortiums.
Siemens AG and its subsidiaries have been named as defendants in various legal actions
and proceedings arising in connection with their activities as a global diversified group. Some
of the legal actions include claims for substantial compensatory or punitive damages or claims
for indeterminate amounts of damages. In the ordinary course of business, Siemens may also
be involved in investigations and administrative and governmental proceedings. Given the
number of legal actions and other proceedings to which Siemens is subject, some may result
in adverse decisions. Siemens contests actions and proceedings when considered appropriate.
In view of the inherent difficulty of predicting the outcome of such matters, particularly in cas-
es in which claimants seek substantial or indeterminate damages, Siemens often cannot pre-
dict what the eventual loss or range of loss related to such matters will be. Although the final
resolution of such matters could have a material effect on Siemens’ consolidated operating
results for any reporting period in which an adverse decision is rendered, Siemens believes
that its consolidated financial position should not be materially affected.
25 Derivative instruments and hedging activities
As part of the Company’s risk management program, a variety of derivative financial instru-
ments are used to reduce risks resulting primarily from fluctuations in foreign-currency
exchange rates and interest rates, as well as to reduce credit risks. The following is a summary
of Siemens’ risk management strategies and the effect of these strategies on the Consolidated
Financial Statements.
Foreign currency exchange risk management
Siemens’ significant international operations expose the Company to significant foreign-
currency exchange risks in the ordinary course of business. The Company employs various
strategies discussed below involving the use of derivative financial instruments to mitigate
or eliminate certain of those exposures.
2007 647
2008 505
2009 421
2010 294
2011 227
Thereafter 495