Siemens 2010 Annual Report Download - page 232

6 To our shareholders 21 Corporate Governance 49 Combined management’s discussion and analysis
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ward completion. Onerous sales contracts are identified by
monitoring the progress of the project and updating the esti-
mate of total contract costs which also requires significant
judgment relating to achieving certain performance standards,
for example in the IT service business, the Mobility Division,
Industry Solutions Division, Workflow and Solutions Division
and the Energy Sector as well as estimates involving warranty
costs. Significant estimates and assumptions are also involved
in the determination of provisions related to major asset retire-
ment obligations. Uncertainties surrounding the amount to be
recognized include, for example, the estimated costs of de-
commissioning because of the long time frame over which
future cash outflows are expected to occur including the re-
spective interest accretion. Amongst others, the estimated
cash outflows could alter significantly if, and when, political
developments affect the government’s plans to develop the
final storage. See Note  Provisions for further information on
major asset retirement obligations.
Siemens is subject to legal and regulatory proceedings in vari-
ous jurisdictions. Such proceedings may result in criminal or
civil sanctions, penalties or disgorgements against the Com-
pany. If it is more likely than not that an obligation of the
Company exists and will result in an outflow of resources, a
provision is recorded if the amount of the obligation can be
reliably estimated. Regulatory and legal proceedings as well as
government investigations often involve complex legal issues
and are subject to substantial uncertainties. Accordingly, man-
agement exercises considerable judgment in determining
whether there is a present obligation as a result of a past event
at the end of the reporting period, whether it is more likely
than not that such a proceeding will result in an outflow of
resources and whether the amount of the obligation can be
reliably estimated. The Company periodically reviews the sta-
tus of these proceedings with both inside and outside counsel.
These judgments are subject to change as new information
becomes available. The required amount of a provision may
change in the future due to new developments in the particu-
lar matter. Revisions to estimates may significantly impact fu-
ture net income. Upon resolution, Siemens may incur charges
in excess of the recorded provisions for such matters. It cannot
be excluded, that the financial position or results of operations
of Siemens will be materially affected by an unfavorable out-
come of legal or regulatory proceedings or government inves-
tigations. See Note  for further information on legal proceed-
ings.
Income taxes – Siemens operates in various tax jurisdictions
and therefore has to determine tax positions under respective
local tax laws and tax authorities’ views which can be complex
and subject to different interpretations of taxpayers and local
tax authorities. Deferred tax assets are recognized if sufficient
future taxable profit is available, including income from fore-
casted operating earnings, the reversal of existing taxable
temporary differences and established tax planning opportuni-
ties. As of each period-end, management evaluates the recov-
erability of deferred tax assets, based on projected future tax-
able profits. As future developments are uncertain and partly
beyond management’s control, assumptions are necessary to
estimate future taxable profits as well as the period in which
deferred tax assets will recover. Estimates are revised in the
period in which there is sufficient evidence to revise the as-
sumption. If management considers it probable that all or a
portion of a deferred tax asset cannot be realized, a corre-
sponding valuation allowance is taken into account.
 – Acquisitions, dispositions
and discontinued operations
a) Acquisitions
In fiscal  and , the Company completed a number of
acquisitions. These acquisitions have been accounted for un-
der the acquisition method and have been included in the
Company ’s Consolidated Financial Statements since the date
of acquisition.
aa) Acquisitions in fiscal 
At the beginning of November , Siemens acquired a con-
trolling interest of  percent in Solel Solar Systems Ltd., Beit
Shemesh / Israel (Solel), in a share deal transaction. Solel is a
solar technology company focusing on the concentrated solar
power (CSP) market. Solel develops, designs, manufactures
and installs equipment for solar thermal power plants. Besides
that, Solel is also developing the Lebrija  (MW) solar ther-
mal power plant in Spain (Lebrija ). The rationale for the ac-
quisition was to expand the product portfolio of Siemens in
the field of CSP to become a leading CSP product and solution
provider. Solel, which was consolidated as of November ,
has been integrated into Sector Energy Renewable Division.
The aggregate consideration amounts to approximately €
(including € cash acquired). The Company further proceeded
with the purchase price allocation in the fourth quarter of fis-
cal , but has not yet finalized it. As such, the amounts
recognized as a result of the fair value measurement of assets
acquired and liabilities assumed have been determined provi-