Siemens 2008 Annual Report Download - page 226

130 Notes to Consolidated Financial Statements
(in millions of €, except where otherwise stated and per share amounts)
applied as their recoverable amount. The assets’ value in use is measured by discounting their estimated future
cash ows. If there is an indication that the reasons which caused the impairment no longer exist, Siemens
would consider the need to reverse all or a portion of the impairment.
The Company’s property, plant and equipment and other intangible assets to be disposed of are recorded at the
lower of carrying amount or fair value less costs to sell and depreciation is ceased.
Discontinued operations – Discontinued operations are reported when a component of an entity comprising
operations and cash ows that can be clearly distinguished, operationally and for nancial reporting purposes,
from the rest of the entity is classied as held for sale or has been disposed of, if the component either (a) repre-
sents a separate major line of business or geographical area of operations or (b) is part of a single co-ordinated
plan to dispose of a separate major line of business or geographical area of operations or (c) is a subsidiary
acquired exclusively with a view to resale.
Income taxes – The Company applies IAS 12, Income Taxes. Under the liability method of IAS 12, deferred tax
assets and liabilities are recognized for the future tax consequences attributable to differences between the
nancial statement carrying amounts of existing assets and liabilities and their respective tax bases. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in the income statement, unless
related to items directly recognized in equity, in the period the new laws are substantively enacted. Deferred tax
assets are recognized to the extent that it is probable that future taxable income will be available against which
the deductible temporary differences, unused tax losses and unused tax credits can be utilized.
Inventories – Inventory is valued at the lower of acquisition or production cost or net realizable value, cost
being generally determined on the basis of an average or rst-in, rst-out method. Production costs comprise
direct material and labor and applicable manufacturing overheads, including depreciation charges. Net realiz-
able value is the estimated selling price in the ordinary course of business, less the estimated costs of comple-
tion and selling expenses.
Provisions – A provision is recognized in the balance sheet when the Company has a present legal or construc-
tive obligation as a result of a past event, it is probable that an outow of economic benets will be required to
settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material,
provisions are recognized at present value by discounting the expected future cash ows at a pre-tax rate that
reects current market assessments of the time value of money. Provisions for onerous contracts are measured
at the lower of the expected cost of fullling the contract and the expected cost of terminating the contract.
Additions to provisions are generally recognized in the income statement. The present value of legal obligations
associated with the retirement of property, plant and equipment (asset retirement obligations) that result from
the acquisition, construction, development or normal use of an asset is added to the carrying amount of the
associated asset. The additional carrying amount is depreciated over the life of the asset. If the asset retirement
obligation is settled for other than the carrying amount of the liability, the Company recognizes a gain or loss on
settlement.
Restructuring charges – are recognized in the period incurred and when the amount is reasonably estimable.
Termination benets are recognised as a liability and an expense when the entity is demonstrably committed,
through a formal termination plan, to either provide termination benets as a result of an offer made in order
to encourage voluntary redundancy or terminate employment before the normal retirement date.