Siemens 2006 Annual Report Download - page 222

Notes to Consolidated Financial Statements
(in millions of €, except where otherwise stated and per share amounts)
218
30 Segment information
As of fiscal 2006, the Company has thirteen reportable segments referred to as Groups report-
ed among the components used in Siemens’ financial statement presentation as described in
Note 1. The Groups are organized based on the nature of products and services provided.
Within the Operations component, Siemens has eleven Groups which involve manufactur-
ing, industrial and commercial goods, solutions and services in areas more or less related to
Siemens origins in the electrical business. Also included in Operations are operating activi-
ties not associated with a Group, which are reported under Other Operations, as well as other
reconciling items discussed in Reconciliation to financial statements below.
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. The Distribution and Industry Logistics as well as the Material Hand-
ling Products divisions of the former L&A had already been carved-out into a separate legal
entity as of September 30, 2005 (see Note 3). 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 Opera-
tions in the third quarter of fiscal 2006. Prior-year information was reclassified for compara-
bility purposes.
As discussed in Note 3, Com’s MD business is reported as discontinued operations. Current
and prior year Segment disclosure excludes the applicable information included in the Com-
pany’s financial statement presentation.
The Financing and Real Estate component includes the Groups SFS and SRE. The Elimi-
nations, reclassifications and Corporate Treasury component separately reports the con-
solidation of transactions among Operations and Financing and Real Estate, as well as cer-
tain reclassifications and the activities of the Company’s Corporate Treasury.
The accounting policies of these components, as well as the Groups included, are generally
the same as those used for Siemens and are described in Note 2 Summary of significant
accounting policies. Corporate overhead is generally not allocated to segments. Intersegment
transactions are generally based on market prices.
New orders are determined principally as the estimated sales value of accepted purchase
orders and order value changes and adjustments, excluding letters of intent.
Operations
The Managing Board is responsible for assessing the performance of the Operations Groups.
The Company’s profitability measure for its Operations Groups is earnings before financing
interest, certain pension costs, and income taxes (Group profit) as determined by the Manag-
ing Board as the chief operating decision maker (see discussion below). Group profit excludes
various categories of items which are not allocated to the Groups since the Managing Board
does not regard such items as indicative of the Groups’ performance. Group profit represents
a performance measure focused on operational success excluding the effects of capital market
financing issues.
Financing interest is any interest income or expense other than interest income related to
receivables from customers, from cash allocated to the Groups and interest expense on
payables to suppliers. Financing interest is excluded from Group profit because decision-mak-
ing regarding financing is typically made centrally by Corporate Treasury.