Siemens 2008 Annual Report Download - page 303

Notes to Consolidated Financial Statements 207
(in millions of €, except where otherwise stated and per share amounts)
Eliminations, Corporate Treasury and other reconciling items comprise consolidation of transactions within the
segments, certain reconciliation and reclassication items and the activities of the Company’s Corporate Treas-
ury. It also includes interest income and expense, such as, for example, interest not allocated to segments or
Other Operations (referred to as nancing interest), interest related to Corporate Treasury activities or resulting
consolidation and reconciliation effects on interest.
Measurement – Segments
While the Company’s organization was rearranged in scal 2008, in general, Siemens retained its previous
performance measurements for the segments.
Accounting policies for Segment Information are generally the same as those used for Siemens, which are
described in Note 2. Corporate overhead is generally not allocated to segments. Intersegment transactions are
generally based on market prices.
Prot of the Sectors, Equity Investments, and Siemens IT Solutions and Services:
Siemens’ Managing Board is responsible for assessing the performance of the segments. The Company’s prot-
ability measure for the Sectors, Equity Investments, and Siemens IT Solutions and Services is earnings before
nancing interest, certain pension costs, and income taxes (Prot) as determined by Management as the chief
operating decision maker. Prot excludes various categories of items, which are not allocated to the Sectors,
Equity Investments, and Siemens IT Solutions and Services since Management does not regard such items as
indicative of their performance. Prot represents a performance measure focused on operational success
excluding the effects of capital market nancing issues. The major categories of items excluded from Prot are
presented below.
Financing interest, excluded from Prot, is any interest income or expense other than interest income related
to receivables from customers, from cash allocated to the Sectors, Equity Investments, and Siemens IT Solutions
and Services and interest expense on payables to suppliers. Financing interest is excluded from Prot because
decision-making regarding nancing is typically made at the Corporate level.
Similarly, decision-making regarding essential pension items is done centrally. As a consequence, Prot primar-
ily includes amounts related to service costs of pension plans only, while all other regularly recurring pension
related costs (including charges for the German pension insurance association and plan administration costs)
are included in the line item Corporate items and pensions.
Furthermore, income taxes are excluded from Prot since income tax is subject to legal structures, which typi-
cally do not correspond to the structure of the segments.
The effect of certain litigation and compliance issues is excluded from Prot, if such items are not indicative of
the Sectors, Equity Investments, and Siemens IT Solutions and Services’ performance, since their related results
of operations may be distorted by the amount and the irregular nature of such events. This may also be the case
for items that refer to more than one reportable segment, SRE and/or Other Operations or have a corporate or
central character.