Siemens 2010 Annual Report Download - page 222

6 To our shareholders 21 Corporate Governance 49 Combined management’s discussion and analysis
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 – Basis of presentation
The accompanying Consolidated Financial Statements present
the operations of Siemens AG with registered offices in Berlin
and Munich, Germany, and its subsidiaries (the Company or
Siemens). They have been prepared in accordance with Inter-
national Financial Reporting Standards (IFRS), as adopted by
the European Union (EU) as well as with the additional require-
ments as set forth in section a() of the German Commer-
cial Code (HGB). The financial statements are also in accor-
dance with IFRS as issued by the IASB. Certain pronounce-
ments have been early adopted, see Note .
Consolidated Financial Statements and Management’s Discus-
sion and Analysis as of September ,  and , prepared
in accordance with Par. a() of the HGB are being filed with
and published in the German Electronic Federal Gazette (elek-
tronischer Bundesanzeiger).
Siemens prepares and reports its Consolidated Financial State-
ments in euros (€). Siemens is a German based multinational
corporation with a balanced business portfolio of activities
predominantly in the field of electronics and electrical engi-
neering (for further information see Note ).
The Consolidated Financial Statements were authorised for
issue by the Managing Board on November , . The Con-
solidated Financial Statements are generally prepared on the
historical cost basis, except as stated in Note .
 – Summary of significant
accounting policies
The accounting policies set out below have been applied con-
sistently to all periods presented in these Consolidated Finan-
cial Statements.
Basis of consolidation – The Consolidated Financial State-
ments include the accounts of Siemens AG and its subsidiaries
which are directly or indirectly controlled. Control is generally
conveyed by ownership of the majority of voting rights. Addi-
tionally, the Company consolidates special purpose entities
(SPE’s) when, based on the evaluation of the substance of the
relationship with Siemens, the Company concludes that it
controls the SPE. To determine when the Company should
consolidate based on substance, Siemens considers the cir-
cumstances listed in SIC-. as additional indicators regard-
ing a relationship in which Siemens controls an SPE. Siemens
looks at these SIC-. circumstances as indicators and always
privileges an analysis of individual facts and circumstances on
a case-by-case basis. Associated companies are recorded in the
Consolidated Financial Statements using the equity method of
accounting. Companies in which Siemens has joint control are
also recorded using the equity method.
Business combinations – Business combinations are ac-
counted for under the acquisition method. The cost of an ac-
quisition is measured at the fair value of the assets given and
liabilities incurred or assumed at the date of exchange. Acqui-
sition-related costs are expensed in the period incurred. Iden-
tifiable assets acquired and liabilities assumed in a business
combination (including contingent liabilities) are measured
initially at their fair values at the acquisition date, irrespective
of the extent of any non-controlling interest. Uniform account-
ing policies are applied. Changes to contingent consideration
classified as a liability at the acquisition date are recognized in
profit and loss. Non-controlling interests may be measured at
their fair value (full-goodwill-methodology) or at the propor-
tional fair value of assets acquired and liabilities assumed. Af-
ter initial recognition non-controlling interests may show a
deficit balance since both profits and losses are allocated to the
shareholders based on their equity interests. In business com-
binations achieved in stages, any previously held equity inter-
est in the acquiree is remeasured to its acquisition date fair
value. If there is no loss of control, transactions with non-
controlling interests are accounted for as equity transactions
not affecting profit and loss. At the date control is lost, any re-
tained equity interests are re-measured to fair value.
Associated companies – Companies in which Siemens has the
ability to exercise significant influence over operating and fi-
nancial policies (generally through direct or indirect ownership
of  percent to  percent of the voting rights) are recorded in
the Consolidated Financial Statements using the equity
method of accounting and are initially recognized at cost.
Where necessary, adjustments are made to bring the account-
ing policies in line with those of Siemens. The excess of
Siemens’ initial investment in associated companies over
Siemens’ ownership percentage in the underlying net assets of
those companies is attributed to certain fair value adjustments
with the remaining portion recognized as goodwill. Goodwill
relating to the acquisition of associated companies is included
in the carrying amount of the investment and is not amortized
Notes