Siemens 2013 Annual Report Download - page 178

92 A. To our Shareholders
117 B. Corporate Governance 155 C. Combined Management Report
156 C. Business and economic environment
173 C. Financial performance system
179 C. Results of operations
192 C. Financial position
204 C. Net assets position
207 C. Overall assessment of the economic position
209 C. Subsequent events
210 C. Sustainability
227 C. Report on expected developments and
associated material opportunities and risks

C... DEFINITIONS OF
OTHER FINANCIAL MEASURES
We also use other financial measures in addition to the mea-
sures described above, such as orders and order backlog for
the assessment of our future revenue potential. We define and
calculate orders and order backlog as follows:
Under our policy for the recognition of orders, we generally
recognize the total contract amount for an order when we en-
ter into a contract that we consider legally effective and com-
pulsory based on a number of different criteria. The contract
amount is the agreed price or fee for that portion of the con-
tract for which the delivery of goods and / or the provision of
services has been irrevocably agreed. Future revenue from ser-
vice, maintenance and outsourcing contracts is recognized as
orders in the amount of the total contract value only if there is
adequate assurance that the contract will remain in effect for
its entire duration (e.g., due to high exit barriers for the cus-
tomer). Orders are generally recognized immediately when the
relevant contract is considered legally effective and compulso-
ry. The only exceptions are orders with short overall contract
terms. In this case, a separate reporting of orders would pro-
vide no significant additional information regarding our per-
formance. For orders of this type, the recognition of orders
thus occurs when the corresponding revenue is recognized.
Order backlog represents an indicator for the future revenues
of our Company resulting from already recognized orders.
Order backlog is calculated by adding the orders of the current
fiscal year to the balance of the order backlog as of the end of
the prior fiscal year and then subtracting the revenue recog-
nized in the current fiscal year. If the amount of an order al-
ready recognized in the current or the previous fiscal years is
modified or if an order from the current fiscal year is cancelled,
we adjust orders for the current quarter and also our order
backlog accordingly, but do not retroactively adjust previously
published orders. However, if an order from a previous fiscal
year is cancelled, orders of the current quarter and, according-
ly, the current fiscal year are generally not adjusted; instead,
the existing order backlog is revised directly. Aside from can-
cellations, the order backlog is also subject to currency transla-
tion and portfolio effects.
There is no standard system for compiling and calculating or-
ders and order backlog information that applies across compa-
nies. Accordingly, our orders and order backlog may not be
comparable with orders and order backlog measures reported
by other companies. We subject our orders and our order back-
log to internal documentation and review requirements. We
may change our policies for recognizing orders and order back-
log in the future without previous notice.