Siemens 2013 Annual Report Download - page 265

253 D. Consolidated Financial Statements 357 E. Additional Information
254 D. Consolidated Statements of Income
255 D. Consolidated Statements of Comprehensive Income
256 D. Consolidated Statements of Financial Position
257 D. Consolidated Statements of Cash Flows
258 D. Consolidated Statements of Changes in Equity
260 D. Notes to Consolidated Financial Statements
348 D. Supervisory Board and Managing Board
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received. Grants awarded for the purchase or the production of
fixed assets (grants related to assets) are generally offset
against the acquisition or production costs of the respective
assets and reduce future depreciations accordingly. Grants
awarded for other than non-current assets (grants related to
income) are reported in the Consolidated Statements of In-
come under the same functional area as the corresponding ex-
penses. They are recognized as income over the periods neces-
sary to match them on a systematic basis to the costs that are
intended to be compensated. Government grants for future
expenses are recorded as deferred income.
Product-related expenses and losses from onerous con-
tracts – Provisions for estimated costs related to product war-
ranties are recorded in line item Cost of sales at the time the
related sale is recognized, and are established on an individual
basis, except for the standard product business. The estimates
reflect historic experience of warranty costs, as well as infor-
mation regarding product failure experienced during construc-
tion, installation or testing of products. In the case of new
products, expert opinions and industry data are also taken into
consideration in estimating product warranty provisions. Ex-
pected losses from onerous contracts are recognized in the pe-
riod when the current estimate of total contract costs exceeds
contract revenue.
Research and development costs – Costs of research activi-
ties undertaken with the prospect of gaining new scientific or
technical knowledge and understanding are expensed as in-
curred.
Costs for development activities, whereby research findings
are applied to a plan or design for the production of new or
substantially improved products and processes, are capitalized
if () development costs can be measured reliably, the product
or process is () technically and () commercially feasible, ()
future economic benefits are probable and () Siemens in-
tends, and () has sufficient resources, to complete develop-
ment and to use or sell the asset. The costs capitalized include
the cost of materials, direct labour and other directly attribut-
able expenditure that serves to prepare the asset for use. Such
capitalized costs are included in line item Other intangible as-
sets as other internally generated intangible assets. Other de-
velopment costs are expensed as incurred. Capitalized devel-
opment costs are stated at cost less accumulated amortization
and impairment losses with an amortization period of general-
ly three to five years.
Government grants for research and development activities
are offset against research and development costs. They are
recognized as income over the periods in which the research
and development costs incur that are to be compensated. Gov-
ernment grants for future research and development costs are
recorded as deferred income.
Earnings per share – Basic earnings per share are computed
by dividing income from continuing operations, income from
discontinued operations and net income, all attributable to or-
dinary shareholders of Siemens AG by the weighted average
number of shares outstanding during the year. Diluted earn-
ings per share are calculated by assuming conversion or exer-
cise of all potentially dilutive securities and share-based pay-
ment plans.
Goodwill – Goodwill is not amortized, but instead tested for
impairment annually, as well as whenever there are events or
changes in circumstances (triggering events) which suggest
that the carrying amount may not be recoverable. Goodwill is
carried at cost less accumulated impairment losses.
The goodwill impairment test is performed at the level of a
cash-generating unit or a group of cash-generating units rep-
resented by a Division or equivalent, which is the lowest level
at which goodwill is monitored for internal management pur-
poses.
For the purpose of impairment testing, goodwill acquired in a
business combination is allocated to the cash-generating unit
or the group of cash-generating units that is expected to bene-
fit from the synergies of the business combination. If the car-
rying amount of the cash-generating unit or the group of cash-
generating units, to which the goodwill is allocated, exceeds
its recoverable amount, an impairment loss on goodwill allo-
cated to this cash-generating unit or this group of cash- gen-
erating units is recognized. The recoverable amount is the
higher of the cash-generating unit’s or the group of cash-gen-
erating units’ fair value less costs to sell and its value in use.
If either of these amounts exceeds the carrying amount, it is
not always necessary to determine both amounts. These val-
ues are generally determined based on discounted cash flow
calculations. Impairment losses on goodwill are not reversed
in future periods if the recoverable amount exceeds the carry-
ing amount of the cash-generating unit or the group of
cash-generating units to which the goodwill is allocated.
Other intangible assets – The Company amortizes intangible
assets with finite useful lives on a straight-line basis over their
respective estimated useful lives to their estimated residual
values. Estimated useful lives for software, patents, licenses
and other similar rights generally range from three to five
years, except for intangible assets with finite useful lives
acquired in business combinations. Intangible assets acquired