Siemens 2011 Annual Report Download - page 244

6 A. To our shareholders
23 B. Corporate Governance 51 C. Combined management’s discussion and analysis
52 C. Business and operating environment
80 C. Fiscal  – Financial summary
83 C. Results of operations
101 C. Financial position
114 C. Net assets position
117 C. Overall assessment of the economic position
118 C. Report on post-balance sheet date events
119 C. Report on expected developments and
associated material opportunities and risks
135 C. Information required pursuant to Section  ()
and Section  () of the German Commercial
Code (HGB) and explanatory report

C.. Definitions of other
financial performances measures
We also use other financial performance measures in addition
to the measures described above, such as new orders and or-
der backlog for the assessment of our future revenue poten-
tial. We define and calculate new orders and order backlog as
follows:
Under its policy for the recognition of new orders, Siemens
generally recognizes a new order when we enter into a con-
tract that we consider legally effective and compulsory based
on a number of different criteria. In general, if a contract is
considered legally effective and compulsory, Siemens recog-
nizes the total contract value. The contract value is the agreed
price or fee for that portion of the contract for which the de-
livery of goods and / or the provision of services has been irre-
vocably agreed. Future revenues from service, maintenance
and outsourcing contracts are recognized as new orders in
the amount of the total contract value only if there is ade-
quate assurance that the contract will remain in effect for its
entire duration (e.g., due to high exit barriers for the custom-
er). New orders are generally recognized immediately when
the relevant contract becomes legally effective and compulso-
ry. The only exceptions are orders with short overall contract
terms. In this case, a separate reporting of new orders would
provide no significant additional information regarding our
performance. For orders of this type the recognition of new
orders thus occurs when the underlying revenue is recog-
nized.
Order backlog represents an indicator for the future revenues
of our Company resulting from already recognized new or-
ders. Order backlog is calculated by adding the new orders of
the current fiscal year to the balance of the order backlog
from the prior fiscal year and by subtracting the revenue rec-
ognized in the current fiscal year. If an order from the current
fiscal year is cancelled or its amount is modified, Siemens ad-
justs its new order total for the current quarter accordingly,
but does not retroactively adjust previously published new or-
der totals. However, if an order from a previous fiscal year is
cancelled, generally new orders of the current quarter and,
accordingly, the current fiscal year are not adjusted, instead,
the existing order backlog is revised. Aside from cancella-
tions, the order backlog is also subject to changes in the con-
solidation group and to currency translation effects.
There is no standard system for compiling and calculating
new orders and order backlog information that applies across
companies. Accordingly, its new orders and order backlog
may not be comparable with new orders and order backlog re-
ported by other companies. Siemens subjects its new orders
and its order backlog to internal documentation and review
requirements. Siemens may change its policies for recogniz-
ing new orders and order backlog in the future without previ-
ous notice.