Siemens 2007 Annual Report Download - page 277

Notes to Consolidated Financial Statements 277
(in millions of €, except where otherwise stated and per share amounts)
Notes to Consolidated Financial Statements
28 Commitments and contingencies
Guarantees and other commitments
The following table presents the undiscounted amount of maximum potential
future payments for each major group of guarantee:
Credit guarantees cover the fi nancial obligations of third parties in cases where
Siemens is the vendor and/or contractual partner. These guarantees generally pro-
vide that in the event of default or non-payment by the primary debtor, Siemens
will be required to settle such fi nancial obligations. In addition, Siemens provides
credit guarantees generally as credit-line guarantees with variable utilization to
joint ventures and associated and related companies. The maximum amount of
these guarantees is subject to the outstanding balance of the credit or, in case
where a credit line is subject to variable utilization, the nominal amount of the
credit line. These guarantees usually have terms of between one and fi ve years.
Except for statutory recourse provisions against the primary debtor, credit guar-
antees are generally not subject to additional contractual recourse provisions. As
of September 30, 2007 and 2006, the Company has accrued €13 and €24, respec-
tively, relating to credit guarantees.
Furthermore, Siemens issues Guarantees of third-party performance, which
include performance bonds and guarantees of advanced payments in cases where
Siemens is the general or subsidiary partner in a consortium. In the event of non-
fulfi llment of contractual obligations by the consortium partner(s), Siemens will
be required to pay up to an agreed-upon maximum amount. These agreements
span the term of the contract, typically ranging from three months to seven years.
Generally, consortium agreements provide for fallback guarantees as a recourse
provision among the consortium partners. No signifi cant liability has been recog-
nized in connection with these guarantees.
The Federal Republic of Germany has commissioned a consortium consisting
of SIS and IBM Deutschland GmbH (IBM) to modernize and operate the non-mili-
tary information and communications technology of the German Federal Armed
Forces (Bundeswehr). This project is called HERKULES. A project company, BWI
Informationstechnik GmbH (BWI) will provide the services required by the terms
of the contract. SIS is a shareholder in the project company. The total contract
value amounts to a maximum of approximately €6 billion. In connection with the
consortium and execution of the contract between BWI and the Federal Republic of
Germany in December 2006, Siemens issued several guarantees connected to each
September 30,
2007 2006
Guarantees
Credit guarantees 386 666
Guarantees of third-party performance 1,995 1,125
Herkules obligations 4,200 –
Other guarantees 1,882 528
8,463 2,319