Siemens 2007 Annual Report Download - page 212

212 Notes to Consolidated Financial Statements
(in millions of €, except where otherwise stated and per share amounts)
The Company’s presentation of Operations, Financing and Real Estate and
Eliminations, reclassifi cations and Corporate Treasury refl ects the manage-
ment of these components as distinctly different business activities, with different
goals and requirements. Management believes that this presentation provides a
clearer understanding of the components of the Company’s fi nancial position,
results of operations and cash fl ows. The accounting principles applied to these
components are generally the same as those used for Siemens. The Company has
allocated equity to the Financing and Real Estate business based on a manage-
ment approach which takes into consideration the inherent risk evident in the
underlying assets. The remaining amount of total equity is shown under Opera-
tions. Income taxes are allocated to Operations, Financing and Real Estate and
Eliminations, reclassifi cations and Corporate Treasury by applying the effec-
tive tax rate of Siemens to the income before income taxes of each respective com-
ponent. Deferred income tax assets and liabilities are allocated to these compo-
nents based on available component specifi c information and applicable
proportions of such amounts to total assets and liabilities of Siemens. The fi nan-
cial data presented for the Operations and Financing and Real Estate and
Eliminations, reclassifi cations and Corporate Treasury components are not
intended to purport the fi nancial position, results of operations and cash fl ows as
if they were separate entities under IFRS.
The information disclosed in these Notes relates to Siemens unless otherwise
stated.
2 Summary of signifi cant accounting policies
The presentation of certain prior year information has been reclassifi ed to con-
form to the current year presentation.
As previously reported, within the former Com Group, the Company’s other
Groups and regional companies, a number of Business Consultant Agreements
and similar sales-related arrangements with third-party intermediaries have
been identifi ed. The Company identifi ed a large volume of payments relating to
fi scal years 2000–2006 made in connection with these agreements and other pay-
ments for which the Company has not been able either to establish a valid busi-
ness purpose or to clearly identify the recipient. The payments identifi ed were
recorded as deductible business expenses in prior periods in determining income
tax provisions. During fi scal 2007, the Company determined that certain of these
payments were non-deductible under tax regulations of Germany and other juris-
dictions. Due to these matters, the Company accounted in fi scal 2007 for an
amount of €352 in income tax charges and €28 in related interest charges in
respect of fi scal years 2000–2006. These income tax charges are in addition to
income tax charges recorded in fi scal 2006 in the amount of €168 relating to
income tax liabilities for certain payments for which Siemens was not able to
establish a valid business purpose or to clearly identify the recipient. The charges
were considered to be immaterial under the rollover method of quantifying mis-
statements and were accounted for in fi scal 2007 by adjusting the comparative
amounts for fi scal years 2006 and 2005 and the opening balance of total equity as