Siemens 2010 Annual Report Download - page 244

6 To our shareholders 21 Corporate Governance 49 Combined management’s discussion and analysis

In fiscal , positive translation differences are primarily at-
tributable to the strengthening of the U.S. $; acquisitions and
purchase accounting adjustments at Energy mainly relate to
the acquisition of Solel Solar Systems, Ltd., see Note ; the
impairment of €, results from the Diagnostics Division of
Healthcare, see below.
Siemens performs the mandatory annual impairment test in
the three months ended September , in accordance with the
accounting policy stated in Note  and . Except for the Diag-
nostics Division within the Healthcare Sector described below,
the recoverable amounts for the annual impairment test 
for divisions and Cross-Sector Businesses were estimated to be
higher than the carrying amounts. Key assumptions on which
management has based its determinations of the fair value
less costs to sell for the Divisions’ and Cross-Sector Businesses’
carrying amount include growth rates up to  percent in fiscal
 and , respectively and after-tax discount rates of
 percent to  percent in fiscal  and . percent to . per-
cent in fiscal . Where possible, reference to market prices
is made.
For the purpose of estimating the fair value less costs to sell of
the Divisions and Cross-Sector Businesses, cash flows were
projected for the next five years based on past experience, ac-
tual operating results and management’s best estimate about
future developments as well as market assumptions.
The fair value less costs to sell is mainly driven by the terminal
value which is particularly sensitive to changes in the assump-
tions on the terminal value growth rate and discount rate. Both
assumptions are determined individually for each Division and
each Cross-Sector Business. Discount rates reflect the current
market assessment of the risks specific to each Division and
each Cross-Sector Business and are based on the weighted
average cost of capital for the Divisions and Cross-Sector Busi-
nesses (for SFS the discount rate represents cost of equity).
Terminal value growth rates take into consideration external
macroeconomic sources of data and industry specific trends.
The following table presents the key assumptions used to de-
termine fair value less costs to sell for impairment test pur-
poses, for Divisions to which a significant amount of goodwill
is allocated:
Year ended September , 
Goodwill Terminal
value
growth rate
After-tax
discount
rate
Diagnostics of the
Healthcare Sector 4,727 2.25% 7.0%
Imaging & IT of the
Healthcare Sector 2,911 2.7% 7.0%
Industry Automation of the
Industry Sector 2,266 2.0% 8.0%
Net book
value as of
 /  / 
Translation
differences
and other
Acquisitions
and purchase
accounting
adjustments 
Dispositions
and reclassi-
fications to
assets classified
as held for
disposal
Impairments Net book
value as of
 /  / 
Sectors
Industry 4,8942(111) 168 (13) (13) 4,925
Energy 2,240 (63) 47 (16) – 2,208
Healthcare 8,617 (156) 15 – – 8,476
Cross-Sector Businesses
Siemens IT Solutions and Services 123 (10) 2 – – 115
Siemens Financial Services (SFS) 111 (14) – – – 97
Centrally managed portfolio activities 192 – – – (19) –
Siemens 16,004 (354) 232 (29) (32) 15,821
1 Includes adjustments from the subsequent recognition of deferred tax assets.
2 Electronics Assembly Systems was reclassified from Industry to Centrally managed portfolio activities in fiscal 2009. Prior-year amounts were adjusted for comparison purposes.