Siemens 2007 Annual Report Download - page 215

Notes to Consolidated Financial Statements 215
(in millions of €, except where otherwise stated and per share amounts)
Notes to Consolidated Financial Statements
Business combinations – All business combinations are accounted for under
the purchase method. The cost of an acquisition is measured at the fair value of
the assets given and liabilities incurred or assumed at the date of exchange plus
costs directly attributable to the acquisition. Identifi able assets acquired and lia-
bilities assumed in a business combination (including contingent liabilities) are
measured initially at their fair values at the acquisition date, irrespective of the
extent of any minority interest. The excess of the cost of acquisition over the fair
value of the Company’s share of the identifi able net assets acquired is recorded as
goodwill.
Associated companies – Companies in which Siemens has the ability to exer-
cise signifi cant infl uence over operating and fi nancial policies (generally through
direct or indirect ownership of 20% to 50% of the voting rights) are recorded in
the Consolidated Financial Statements using the equity method of accounting and
are initially recognized at cost. The excess of Siemens’ initial investment in asso-
ciated companies over Siemens’ ownership percentage in the underlying net
assets of those companies is attributed to certain fair value adjustments with the
remaining portion recognized as goodwill. Goodwill relating to the acquisition of
associated companies is included in the carrying amount of the investment and is
not amortized but is tested for impairment as part of the overall investment in the
associated company.
Siemens’ share of its associated companies’ post-acquisition profi ts or losses is
recognized in the income statement, and its share of post-acquisition movements
in equity that have not been recognized in the associates’ profi t or loss is recog-
nized directly in equity. The cumulative post-acquisition movements are adjusted
against the carrying amount of the investment in the associated company. When
Siemens’ share of losses in an associated company equals or exceeds its interest in
the associate, Siemens does not recognize further losses, unless it incurs obliga-
tions or makes payments on behalf of the associate.
Material intercompany results arising from transactions between Siemens and
its associated companies are eliminated to the extent of Siemens’ interest in the
associated company.
Foreign currency translation – The assets and liabilities of foreign subsidiar-
ies, where the functional currency is other than the euro, are translated using
period-end exchange rates, while the statements of income are translated using
average exchange rates during the period. Differences arising from such transla-
tions are recognized within equity.