Siemens 2007 Annual Report Download - page 118

118 Management’s discussion and analysis
In this report we include information concerning new orders for each of the
years presented. Under our order recognition policy, we generally recognize a
new order when we enter into a contract that we consider “effective and binding”
based on our review of a number of different criteria. As a general rule, if a con-
tract is considered effective and binding, we recognize the total contract value as
promptly as practicable, where total contract value is defi ned as the agreed price
for the goods to be delivered and services to be rendered, or the agreed fee, in
each case for the irrevocable term of the contract. For service, maintenance and
outsourcing contracts with a contractual term of greater than 12 months, if
management determines that there is a high degree of uncertainty concerning
whether the customer will adhere to the full contract term, the agreed fees for the
next 12 months are recognized as new orders on a revolving basis. In the event an
order is cancelled or modifi ed in amount during the ongoing fi scal year, we adjust
our new order total for the current period accordingly, rather than retroactively
adjust previously published new order totals. However, if an order from the previ-
ous year is cancelled, it is generally not adjusted from current period new orders,
but instead from existing orders on hand. There is no standard system among
companies in our areas of activity for the compilation of new order information,
with the result that our new order totals may not be comparable with new order
totals published by other companies. Our new order totals are not audited by our
external auditors, but we do subject them to internal documentation and review
requirements. We may change our policies for recognizing new orders in the
future without previous notice.