Siemens 2007 Annual Report Download - page 171

Management’s discussion and analysis 171
Management’s discussion and analysis
million for fi scal 2000-2006 with respect to payments with a total volume of
approximately €599 million which were determined to be non-deductible for tax
purposes. The Company also recorded interest charges of €11 million related to
the tax obligations.
¢ In fi scal 2007, the Company also recorded charges for fi scal 2000-2006 in the
amount of €77 million for estimated additional income tax expenses outside of
Germany relating to payments in connection with BCAs, other sales-related
agreements with third-party intermediaries and other payments of approxi-
mately €258 million which were determined to be non-deductible for tax pur-
poses. The Company also recorded interest charges of €5 million related to the
tax obligations.
As previously reported, in fi scal 2006, the Company recorded income tax
charges in the amount of €168 million relating to German income tax liabilities
with respect to payments of approximately €417 million. In fi scal 2006, the Com-
pany also recorded certain immaterial charges with respect to non-German tax
obligations. Due to the matters mentioned above, the Company accounted for an
additional amount of €352 million in income tax charges and €28 million in
related interest charges related to fi scal 2000-2006. Siemens adjusted comparative
amounts for fi scal 2005 and 2006 in the consolidated fi nancial statements for fi s-
cal 2007. The effect of these adjustments on net income for fi scal 2006 and 2005
and shareholders’ equity as of October 1, 2004 amounted to an increase of €25
million, a decrease of €69 million and a decrease of €336 million, respectively. For
further information, please refer to the “Notes to Consolidated Financial State-
ments.”
In addition, in fi scal 2007, the Company also recorded an immaterial charge
in respect of certain non-German tax penalties relating to the matters described
above; the Company also recorded an immaterial tax charge based on its estimate
of potential tax liabilities relating to sales-related intermediary and other pay-
ments in fi scal 2007. The Company is in an ongoing process of reviewing existing
BCAs for purposes of compliance risk in connection with their continued perfor-
mance. The Company has discontinued payment under a number of BCAs and, in
certain cases, has terminated BCAs, and recorded related charges in immaterial
amounts.
In the course of its independent investigation, Debevoise also identifi ed cer-
tain commission liability accounts at the Med Group which were created in fi scal
years prior to 2005 and subsequently released in a manner that did not comply
with applicable accounting principles. The release of those liabilities resulted in
an increase in group profi t at Med of €25 million and an increase in net income of
€15 million in fi scal 2005 and an increase in group profi t of €24 million and an
increase in net income of €15 million in fi scal 2006 with no impact on group profi t
in fi scal 2007. As a result, opening shareholder’s equity as of October 1, 2004 was
understated by €30 million. In addition, these accounts may have been used to
fund payments in connection with BCAs. The Company adjusted comparative
amounts for prior periods in the consolidated fi nancial statements for fi scal 2007.
For further information, please refer to the “Notes to Consolidated Financial State-
ments”.