Siemens 2007 Annual Report Download - page 115

Management’s discussion and analysis 115
Management’s discussion and analysis
Basis of Presentation
To help shareholders understand and follow our progress, we present our fi nan-
cial 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’ expertise in innovative electrical engineering. We
call this component 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 defi ned by IFRS.
We measure the performance of the Groups in Operations using Group profi t,
defi ned as earnings before fi nancing interest, certain pension costs and income
taxes. Group profi t therefore 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 Group’s performance. The effect of certain litigation and compli-
ance issues is also not included in Group profi t when the Company concludes that
such items are not indicative of the Groups’ performance since the results of oper-
ations of the Groups may be distorted by the amount and the irregular nature of
such events. This may also be the case for items that refer to more than one Group
or have a corporate or central character. For additional information with respect
to Group profi t, see “Notes to Consolidated Financial Statements.” The Managing
Board also determined Net capital employed as additional information to assess
the capital intensity of the Operations Groups. Its defi nition corresponds with the
Group profi t measure. In addition, Free cash fl ow is used to compare cash genera-
tion among the Groups. For additional information see “Notes to Consolidated
Financial Statements.”
In fi scal 2006, Siemens announced portfolio changes that resulted in dissolv-
ing Com as a Group and reportable segment. As discussed in “Notes to Consoli-
dated Financial Statements,” the primary business components of the former
operating segment Com were either already disposed of (carrier networks and
MD) or still held for disposal (enterprise networks) as of September 30, 2007.
Beginning October 1, 2006, A&D assumed responsibility for Com’s Wireless
Modules business. Except for Wireless Modules and other businesses including
the former division Siemens Home and Offi ce Communication Devices that was
reclassifi ed from Com to Other Operations in the third quarter of fi scal 2006, the
historical results of the former operating segment Com are presented as discon-
tinued operations. Current and prior-year segment disclosures exclude the appli-
cable information included in the Company’s fi nancial statement presentation.