Siemens 2011 Annual Report Download - page 233

153 D. Consolidated Financial Statements
273 E. Additional information
143 C. Additional information for supplemental
financial measures
145 C. Siemens AG (Discussion on basis of
German Commercial Code)
151 C. Notes and forward-looking statements
140 C. Information required pursuant to Section  ()
and Section  () no.  of the German Commer-
cial Code (HGB) and explanatory report
142 C. Compensation report and Corporate Governance
statement pursuant to Section a of the German
Commercial Code (HGB)

further claims in connection with the circumstances that led
to the corruption proceedings described above. For additional
information with respect to specific proceedings, see D.
Notes to Consolidated Financial Statements. There can be no
assurance that the results of these or any other proceedings
will not materially harm our business, reputation or brand.
Moreover, even if we ultimately prevail on the merits in any
such proceedings, we may have to incur substantial legal fees
and other costs defending ourselves against the underlying
allegations. We record a provision for legal risks when () we
have a present obligation as a result of a past event; () it is
probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; and () a reli-
able estimate can be made of the amount of the obligation. In
addition, we maintain liability insurance for certain legal risks
at levels our management believes are appropriate and con-
sistent with industry practice. Our insurance policy, however,
does not protect us against reputational damage. Moreover,
we may incur losses relating to legal proceedings beyond the
limits, or outside the coverage, of such insurance. Finally,
there can be no assurance that we will be able to maintain ad-
equate insurance coverage on commercially reasonable terms
in the future. Each of these risks may have a material adverse
effect on our business, financial condition and results of op-
erations, and our provisions for legal proceedings-related
losses may not be sufficient to cover our ultimate losses or ex-
penditures.
Examinations by tax authorities and changes in tax regu-
lations could adversely affect our business, financial con-
dition and results of operations: We operate in around 
countries and therefore are subject to different tax regula-
tions. Changes in tax law could result in higher tax expense
and payments. Furthermore, legislative changes could mate-
rially impact our tax receivables and liabilities as well as de-
ferred tax assets and deferred tax liabilities. In addition, the
uncertain tax environment in some regions could limit our
ability to enforce our rights. As a globally operating organiza-
tion, we conduct business in countries subject to complex tax
rules, which may be interpreted in different ways. Future in-
terpretations or developments of tax regimes may affect our
tax liability, return on investments and business operations.
We are regularly examined by tax authorities in various juris-
dictions.
We are subject to environmental and other government
regulations: Some of the industries in which we operate are
highly regulated. Current and future environmental and other
government regulations or changes thereto may require us to
change the way we run our operations and could result in sig-
nificant increases in our operating or product costs. In addi-
tion, while we have procedures in place to ensure compliance
with applicable governmental regulations in the conduct of
our business operations, it cannot be excluded that violations
of applicable governmental regulations may occur either by
us or by third parties that we contract with, including suppli-
ers or service providers, whose activities may be attributed to
us. Any such violations expose us to the risk of liability, repu-
tational damage or loss of licenses or permits that are impor-
tant to our business operations. In particular, we could also
face liability for damage or remediation for environmental
contamination at the facilities we design or operate. For ex-
ample, we are required to bear environmental clean-up costs
mainly related to remediation and environmental protection
liabilities which have been accrued based on the estimated
costs of decommissioning facilities for the production of ura-
nium and mixed-oxide fuel elements in Hanau, Germany, as
well as a nuclear research and service center in Karlstein, Ger-
many. For further information, see D. Notes to Consolidat-
ed Financial Statements. We establish provisions for environ-
mental risks when () we have a present obligation as a result
of a past event; () it is probable that an outflow of resources
embodying economic benefits will be required to settle the
obligation; and () a reliable estimate can be made of the
amount of the obligation. With regard to certain environmen-
tal risks, we maintain liability insurance at levels that our
management believes are appropriate and consistent with in-
dustry practice. We may incur environmental losses beyond
the limits, or outside the coverage, of such insurance, and
such losses may have a material adverse effect on our busi-
ness, financial condition and results of our operations. In ad-
dition, our provisions for environmental liabilities may not be
sufficient to cover our ultimate losses or expenditures result-
ing therefrom.
C.. Opportunities
Within our comprehensive, interactive and management-ori-
ented Enterprise Risk Management (ERM) approach that is in-
tegrated into the organization and that addresses both risks
and opportunities, we regularly identify, evaluate and respond
to opportunities that present themselves in our various fields
of activity. While we describe our most significant opportuni-
ties below, those are not the only ones we encounter. In addi-
tion, our assessment of opportunities is subject to change as
our Company, our markets and technologies are constantly
developing. As a consequence, new opportunities may arise,