Siemens 2006 Annual Report Download - page 214

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Notes to Consolidated Financial Statements
(in millions of €, except where otherwise stated and per share amounts)
210
Credit default swaps – The fair value of credit default swaps is calculated by comparing
discounted expected future cash flows using current bank conditions with discounted expect-
ed future cash flows using contracted conditions.
As of September 30, 2006 and 2005, the net fair value of derivative financial instruments
amounted to €163 and €172, respectively, which was recorded on the Consolidated Balance
Sheets in Other current assets amounting to €644 and €812, respectively, and Other current
liabilities in the amount of €481 and €640, respectively.
Non-derivative financial instruments
The fair values for non-derivative financial instruments are determined as follows: Fair value
of cash and cash equivalents, short-term receivables, accounts payable, additional liabilities
and commercial paper and borrowings under revolving credit facilities approximate their
carrying amount, largely due to the short-term maturities of these instruments.
Financial assets and securities
Fair values for marketable securities and publicly traded, long-term equity investments are
derived from quoted market prices. It is not practicable to estimate the fair value of the Com-
pany’s long-term investments which are not publicly traded, as there are no readily available
market prices. The following table presents the fair value (if readily available) and carrying
amount of long-term investments:
Financing receivables
Long-term fixed rate and variable rate receivables are evaluated by the Company based on
parameters such as interest rates, specific country risk factors, individual creditworthiness of
the customer and the risk characteristics of the financed project. Based on this evaluation,
allowances are taken to account for the expected losses of these receivables. As of September
30, 2006 and 2005, the carrying amounts of such receivables, net of allowances, approximate
their fair value.
Debt
The fair value of debt is estimated by discounting future cash flows using rates currently avail-
able for debt of similar terms and remaining maturities. As of September 30, 2006 and 2005,
the fair value and carrying amount of debt is as follows:
September 30,
2006 2005
Fair value 4,237 3,935
Carrying amount 3,922 3,768
September 30,
2006 2005
Fair value 16,266 12,994
Carrying amount 15,574 12,435