Siemens 2011 Annual Report Download - page 344

6 A. To our shareholders 51 C. Combined management’s discussion and analysis 23 B. Corporate Governance
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the Sectors in fiscal . Profit represents a performance
measure focused on operational success excluding the effects
of capital market financing issues; for financing issues regard-
ing Equity Investments see paragraph below. The major cate-
gories of items excluded from Profit are presented below.
Financing interest, excluded from Profit, is any interest in-
come or expense other than interest income related to receiv-
ables from customers, from cash allocated to the Sectors and
Equity Investments and interest expense on payables to sup-
pliers. Borrowing costs capitalized as part of qualifying long-
term projects are not part of financing interest. Financing in-
terest is excluded from Profit because decision-making regard-
ing financing is typically made at the corporate level. Equity
Investments include interest and impairments as well as re-
versals of impairments on long-term loans granted to invest-
ments reported in Equity Investments, primarily NSN.
Similarly, decision-making regarding essential pension items
is done centrally. Accordingly, Profit primarily includes
amounts related to service cost of pension plans only, while
all other regularly recurring pension related costs – including
charges for the German pension insurance association and
plan administration costs – are included in line item Corpo-
rate items and pensions. Curtailments are a partial payback
with regard to past service cost that affect Segment Profit.
Furthermore, income taxes are excluded from Profit since in-
come tax is subject to legal structures, which typically do not
correspond to the structure of the segments.
The effect of certain litigation and compliance issues is ex-
cluded from Profit, if such items are not indicative of the
Sectors’ and Equity Investments’ performance, since their re-
lated results of operations may be distorted by the amount
and the irregular nature of such events. This may also be the
case for items that refer to more than one reportable seg-
ment, SRE and / or Centrally managed portfolio activities or
have a corporate or central character.
Beginning with fiscal , central infrastructure costs, which
were formerly reported in Corporate items, are allocated pri-
marily to the Sectors. The total amount to be allocated is de-
termined at the beginning of the fiscal year and is charged in
equal installments in all four quarters. Prior period segment
information is reported on a comparable basis.
Profit of Equity Investments mainly comprises income (loss)
from investments presented in Equity Investments, such as
the share in the earnings of associates or dividends from in-
vestments not accounted for under the equity method, in-
come (loss) from the sale of interests in investments, impair-
ment of investments and reversals of impairments. It also in-
cludes interest and impairments as well as reversals of impair-
ments on long-term loans granted to investments reported in
Equity Investments, primarily NSN.
Profit of the segment SFS
Profit of the segment SFS is Income before income taxes. In
contrast to performance measurement principles applied to
the Sectors and Equity Investments interest income and ex-
pense is an important source of revenue and expense of SFS.
Asset measurement principles
Management determined Assets as a measure to assess capi-
tal intensity of the Sectors and Equity Investments (Net capi-
tal employed). Its definition corresponds to the Profit mea-
sure. It is based on Total assets of the Consolidated State-
ments of Financial Position, primarily excluding intragroup fi-
nancing receivables, intragroup investments and tax related
assets, since the corresponding positions are excluded from
Profit. Mobility, a Division of Industry, includes the project-
specific intercompany financing of a long-term project. The
remaining assets are reduced by non-interest-bearing liabili-
ties other than tax related liabilities, e.g. trade payables, to
derive Assets. Equity Investments may include certain share-
holder loans granted to investments reported in Equity Invest-
ments, primarily NSN. In contrast, Assets of SFS is Total as-
sets. A reconciliation of Assets disclosed in Segment informa-
tion to Total assets in the Consolidated Statements of Finan-
cial Position is presented below.
New orders
New orders are determined principally as estimated revenue
of accepted purchase orders and order value changes and ad-
justments, excluding letters of intent. New orders are supple-
mentary information, provided on a voluntary basis. It is not
part of the audited Consolidated Financial Statements.
Free cash flow definition
Segment information discloses Free cash flow and Additions
to property, plant and equipment and intangible assets. Free
cash flow of the Sectors and Equity Investments constitutes