Siemens 2012 Annual Report Download - page 303

135 D. Consolidated Financial Statements 239 E. Additional Information
140 D. Consolidated Statements of Changes in Equity
142 D. Notes to Consolidated Financial Statements
232 D. Supervisory Board and Managing Board
136 D. Consolidated Statements of Income
137 D. Consolidated Statements of Comprehensive Income
138 D. Consolidated Statements of Financial Position
139 D. Consolidated Statements of Cash Flow

Eliminations, Corporate Treasury and other reconciling
items – comprise consolidation of transactions within the
segments, certain reconciliation and reclassification items and
the activities of the Company ’s Corporate Treasury. It also
includes interest income and expense, such as, for example,
interest not allocated to segments or Centrally managed port-
folio activities (referred to as financing interest), interest relat-
ed to Corporate Treasury activities or resulting consolidation
and reconciliation effects on interest.
 – 
Accounting policies for Segment information are generally the
same as those used for Siemens, described in   -
    . Lease transactions,
however, are classified as operating leases for internal and
segment reporting purposes. Intersegment transactions are
based on market prices.
   
   :
Siemens’ Managing Board is responsible for assessing the per-
formance of the segments. The Company ’s profitability mea-
sure of the Sectors and Equity Investments is earnings before
financing interest, certain pension costs, and income taxes as
determined by the chief operating decision maker (Profit).
Profit excludes various categories of items, not allocated to
the Sectors and Equity Investments, which management does
not regard as indicative of their performance. Profit represents
a performance measure focused on operational success ex-
cluding the effects of capital market financing issues; for fi-
nancing issues regarding Equity Investments see paragraph
below. The major categories of items excluded from Profit are
presented below.
Financing interest, excluded from Profit, is any interest income
or expense other than interest income related to receivables
from customers, from cash allocated to the Sectors and Equity
Investments and interest expense on payables to suppliers.
Borrowing costs capitalized as part of qualifying long-term
projects are not part of financing interest. Financing interest is
excluded from Profit because decision-making regarding fi-
nancing is typically made at the corporate level. Equity Invest-
ments include interest and impairments as well as reversals of
impairments on long-term loans granted to investments re-
ported in Equity Investments.
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 admin-
istration costs – are included in line item Corporate 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 exclud-
ed from Profit, if such items are not indicative of the Sectors’
and Equity Investments’ performance, since their related re-
sults of operations may be distorted by the amount and the ir-
regular nature of such events. This may also be the case for
items that refer to more than one reportable segment, SRE and
(or) Centrally managed portfolio activities or have a corporate
or central character.
Central infrastructure costs are primarily allocated to the
Sectors. The total amount to be allocated is determined at the
beginning of the fiscal year and is charged in equal install-
ments in all four quarters.
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, income
(loss) from the sale of interests in investments, impairment of
investments and reversals of impairments. It also includes in-
terest and impairments as well as reversals of impairments on
long-term loans granted to investments reported in Equity In-
vestments, primarily NSN.
    :
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.
  :
Management determined Assets as a measure to assess
capital intensity of the Sectors and Equity Investments (Net
capital employed). Its definition corresponds to the Profit
measure. It is based on Total assets of the Consolidated
Statements of Financial Position, primarily excluding intra-
group financing receivables, intragroup investments and
tax related assets, since the corresponding positions are
excluded from Profit. A Division of Infrastructure & Cities
includes the project-specific intercompany financing of a
long-term project. The remaining assets are reduced by non-
interest-bearing liabilities other than tax related liabilities,
e.g. trade payables, to derive Assets. Equity Investments may