Siemens 2010 Annual Report Download - page 227

147 Consolidated Financial Statements
148 Consolidated Statements of Income
149 Consolidated Statements of Comprehensive Income
150 Consolidated Statements of Financial Position
151 Consolidated Statements of Cash Flow
152 Consolidated Statements of Changes in Equity
154 Notes to Consolidated Financial Statements
(in millions of €, except where otherwise stated
and per share amounts)
261 Additional information
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For unfunded plans, Siemens recognizes a pension liability
equal to the DBO adjusted by unrecognized past service cost.
For funded plans, Siemens offsets the fair value of the plan
assets with the benefit obligations. Siemens recognizes the
net amount, after adjustments for effects relating to unrecog-
nized past service cost and any asset ceiling, under pension
liability or pension asset.
Actuarial gains and losses, resulting for example from an ad-
justment of the discount rate or from a difference between
actual and expected return on plan assets, are recognized by
Siemens in the Consolidated Statements of Comprehensive
Income in the year in which they occur. Those effects are re-
corded in full directly in equity, net of tax.
Provisions – A provision is recognized in the Statement of Fi-
nancial Position when the Company has a present legal or
constructive obligation as a result of a past event, it is probable
that an outflow of economic benefits 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 flows at a pre-tax rate that reflects current market
assessments of the time value of money. When a contract be-
comes onerous, the present obligation under the contract is
recognized as a provision and measured at the lower of the
expected cost of fulfilling the contract and the expected cost
of terminating the contract as far as they exceed the expected
economic benefits of the contract. Additions to provisions and
reversals are generally recognized in the income statement.
The present value of legal obligations associated with the re-
tirement 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 related asset. The additional carrying amount is
depreciated over the useful life of the related asset. Additions
to and reductions from the present value of asset retirement
obligations that result from changes in estimates are generally
recognized by adjusting the carrying amount of the related
asset and provision. If the asset retirement obligation is settled
for other than the carrying amount of the liability, the Com-
pany recognizes a gain or loss on settlement.
Termination benefits – Termination benefits are recognized in
the period incurred and when the amount is reasonably esti-
mable. Termination benefits in accordance with IAS  are
recognized as a liability and an expense when the entity is
demonstrably committed, through a formal termination plan
or otherwise creating a valid expectation, to either provide
termination benefits as a result of an offer made in order to
encourage voluntary redundancy or terminate employment
before the normal retirement date.
Financial instruments – A financial instrument is any contract
that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity. Financial assets
of the Company mainly include cash and cash equivalents,
available-for-sale financial assets, trade receivables, loans re-
ceivable, finance lease receivables and derivative financial in-
struments with a positive fair value. Cash and cash equivalents
are not included within the category available-for-sale financial
assets as these financial instruments are not subject to fluc-
tuations in value. Siemens does not make use of the category
held to maturity. Financial liabilities of the Company mainly
comprise notes and bonds, loans from banks, commercial pa-
per, trade payables, finance lease payables and derivative fi-
nancial instruments with a negative fair value. Siemens does
not make use of the option to designate financial assets or fi-
nancial liabilities at fair value through profit or loss at incep-
tion (Fair Value Option). Based on their nature, financial instru-
ments are classified as financial assets and financial liabilities
measured at cost or amortized cost and financial assets and
financial liabilities measured at fair value and as receivables
from finance leases. See Notes  and  for further informa-
tion.
Financial instruments are recognized on the Statement of Fi-
nancial Position when Siemens becomes a party to the contrac-
tual obligations of the instrument. Regular way purchases or
sales of financial assets, i.e. purchases or sales under a con-
tract whose terms require delivery of the asset within the time
frame established generally by regulation or convention in the
marketplace concerned, are accounted for at the trade date.
Initially, financial instruments are recognized at their fair val-
ue. Transaction costs directly attributable to the acquisition or
issue of financial instruments are only recognized in determin-
ing the carrying amount, if the financial instruments are not
measured at fair value through profit or loss. Finance lease
receivables are recognized at an amount equal to the net in-
vestment in the lease. Subsequently, financial assets and lia-
bilities are measured according to the category – cash and cash
equivalents, available-for-sale financial assets, loans and re-
ceivables, financial liabilities measured at amortized cost or
financial assets and liabilities classified as held for trading – to
which they are assigned.