Siemens 2008 Annual Report Download - page 200

104 Management’s discussion and analysis
Our nancial condition, results of operations and cash ows are inuenced signicantly by the actual and
expected performance of the Sectors and Cross-Sector Businesses, as well as the Company’s portfolio measures.
An actual or expected negative development of our results of operations or cash ows or an increase in our net
debt position may result in the deterioration of our credit rating. Expected or actual downgrades by rating agen-
cies may increase our cost of capital, may reduce our potential investor base and may negatively affect our busi-
nesses.
Capital structure
The funded status of our pension plans may be affected by an increase or decrease in the Dened Benet Obliga-
tion (DBO), as well as by an increase or decrease in the valuation of plan assets. Pensions are accounted for in
accordance with actuarial valuations, which rely on statistical and other factors in order to anticipate future
events. These factors include key pension plan valuation assumptions such as the discount rate, expected rate of
return on plan assets, rate of future compensation increases and pension progression. Assumptions may differ
from actual developments due to changing market and economic conditions, thereby resulting in an increase or
decrease in the DBO. Signicant changes in investment performance or a change in the portfolio mix of invested
assets can result in corresponding increases and decreases in the valuation of plan assets, particularly equity
securities, or in a change of the expected rate of return on plan assets. Also, changes in pension plan assump-
tions can affect net periodic pension cost. For example, a change in discount rates or in the expected return on
plan assets assumption may result in changes in the net benet pension cost in the following nancial year. For
additional information, see “Notes to Consolidated Financial Statements.”
For further information with regard to nancial risks and nancial risk management, see “Notes to Consolidated
Financial Statements.”
Compliance risks
Code of conduct
Public prosecutors and other government authorities in jurisdictions around the world are investigating allega-
tions of corruption at a number of Siemens’ former business Groups and regional companies. In addition to
ongoing investigations, there could be additional investigations launched in the future by governmental author-
ities in these or other jurisdictions and existing investigations may be expanded. These governmental authori-
ties may take action against us or some of our employees. These actions could include criminal and civil nes, in
addition to those already imposed on the Company, as well as penalties, sanctions, injunctions against future
conduct, prot disgorgement, disqualications from engaging in certain types of business, the loss of business
licenses or permits or other restrictions. In addition to monetary and other penalties, a monitor could be
appointed to review future business practices with the goal of ensuring compliance with applicable laws and we
may otherwise be required to further modify our business practices and compliance programs. Tax authorities
may also impose certain remedies, including potential tax penalties. In scal year 2008, Siemens accrued a pro-
vision in the amount of approximately €1 billion in connection with ongoing discussions with the Munich public
prosecutor, the SEC and DOJ for the purpose of resolving their respective investigations. Depending on the
development of the investigations, we may be required to accrue additional material amounts for such penalties,
damages, prot disgorgement or other possible actions that may be taken by various governmental authorities.
Any of the foregoing could have a material adverse effect on our business, nancial results and condition, the
price of our shares and ADSs and our reputation.