Siemens 2008 Annual Report Download - page 255

Notes to Consolidated Financial Statements 159
(in millions of €, except where otherwise stated and per share amounts)
24 Pension plans and similar commitments
Pension benets provided by Siemens are currently organized primarily through dened benet pension plans
which cover almost all of the Company’s domestic employees and many of the Company’s foreign employees. To
reduce the risk exposure to Siemens arising from its pension plans, the Company performed a redesign of some
major pension plans during the last several years towards benet schemes which are predominantly based on
contributions made by the Company. In order to fund Siemens’ pension obligations, the Company’s major pen-
sion plans are funded with assets in segregated pension entities.
Furthermore, the Company provides other post-employment benets, which primarily consist of transition pay-
ments to German employees after retirement as well as post-employment health care and life insurance benets
to employees in the U.S. and Canada. These predominantly unfunded other post-employment benet plans
qualify as dened benet plans under IFRS.
In addition to the above, the Company has foreign dened contribution plans for pensions and other post-
employment benets or makes contributions to social pension funds based on legal regulations (State plans).
The recognition of a liability is not required because the obligation of the Company is limited to the payment
of the contributions into these plans or funds.
Accounting for dened benet plans
Consolidated Balance Sheets
Dened benet plans determine the entitlements of their beneciaries. An employee’s nal benet entitlement
at regular retirement age may be higher than the xed benets at the balance sheet date due to future compen-
sation or benet increases. The net present value of this ultimate future benet entitlement for service already
rendered is represented by the Dened Benet Obligation (DBO), which is actuarially calculated with consider-
ation for future compensation increases.
In the case of unfunded plans, the recognized pension liability is equal to the DBO adjusted by unrecognized
past service cost. In the case of funded plans, the fair value of the plan assets is offset against the benet obliga-
tions. The net amount, after adjusting for the effects of unrecognized past service cost and any asset ceiling,
is recognized as pension liability or pension asset.
The Consolidated Balance Sheets include the following signicant components related to pension plans and
similar commitments based upon the situation as of September 30, 2008 and 2007:
September 30,
2008 2007
Principal pension benet plans 2,580 1,289
Principal other post-employment benet plans 639 766
Other 1,142 1,232
Reclassication to liabilities held for disposal – (507)
Liabilities for pension plans and similar commitments 4,361 2,780
Prepaid costs for post-employment benefits 99 182
Actuarial (losses)/gains and effects due to asset ceiling (1,591) 127
Income tax effect (16) (18)
Net amount recognized in the Consolidated Statements of
Income and Expense recognized in Equity (net of tax) (1,607) 109