Siemens 2013 Annual Report Download - page 266

92 A. To our Shareholders 117 B. Corporate Governance 155 C. Combined Management Report
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in business combinations primarily consist of customer rela-
tionships and technology. Useful lives in specific acquisitions
ranged from seven to twenty-five years for customer relation-
ships and from three to  years for technology. Intangible
assets which are determined to have indefinite useful lives as
well as intangible assets not yet available for use are not amor-
tized, but instead tested for impairment at least annually.
Property, plant and equipment – Property, plant and equip-
ment is valued at cost less accumulated depreciation and im-
pairment losses. This also applies to property classified as in-
vestment property. Investment property consists of property
held either to earn rentals or for capital appreciation or both
and not used in production or for administrative purposes. The
fair value disclosed for investment property is primarily based
on a discounted cash flow approach except for certain cases
which are based on appraisal values.
If the costs of certain components of an item of property, plant
and equipment are significant in relation to the total cost of
the item, they are accounted for and depreciated separately.
Depreciation expense is recognized using the straight-line
method. Residual values and useful lives are reviewed annual-
ly and, if expectations differ from previous estimates, adjusted
accordingly. Costs of construction of qualifying assets, i.e. as-
sets that require a substantial period of time to be ready for its
intended use, include capitalized interest, which is amortized
over the estimated useful life of the related asset. The follow-
ing useful lives are assumed:
Factory and office buildings 20 to 50 years
Other buildings 5 to 10 years
Technical machinery & equipment 5 to 10 years
Furniture & office equipment generally 5 years
Equipment leased to others generally 3 to 5 years
Impairment of property, plant and equipment and other
intangible assets – The Company reviews property, plant
and equipment and other intangible assets for impairment
whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. In ad-
dition, intangible assets with indefinite useful lives as well as
intangible assets not yet available for use are subject to an an-
nual impairment test. Recoverability of assets is measured by
the comparison of the carrying amount of the asset to the re-
coverable amount, which is the higher of the asset’s value in
use and its fair value less costs to sell. If assets do not generate
cash inflows that are largely independent of those from other
assets or groups of assets, the impairment test is not per-
formed at an individual asset level, instead, it is performed at
the level of the cash-generating unit the asset belongs to. If
such assets are considered to be impaired, the impairment to
be recognized is measured by the amount by which the carry-
ing amount of the assets or cash-generating unit exceeds their
recoverable amount. If the fair value cannot be determined,
the assets’ value in use is applied as their recoverable amount.
The assets’ value in use is measured by discounting their esti-
mated future cash flows. If there is an indication that the rea-
sons which caused the impairment no longer exist, Siemens
assesses the need to reverse all or a portion of the impairment.
The Company ’s property, plant and equipment and other in-
tangible assets to be disposed of are recorded at the lower of
carrying amount or fair value less costs to sell and deprecia-
tion is ceased.
Discontinued operations and non-current assets held
for disposal – Discontinued operations are reported when a
component of an entity comprising operations and cash flows
that can be clearly distinguished, operationally and for finan-
cial reporting purposes, from the rest of the entity is classified
as held for disposal or has been disposed of, if the component
either () represents a separate major line of business or geo-
graphical area of operations and () is part of a single co-ordi-
nated plan to dispose of a separate major line of business or
geographical area of operations or () is a subsidiary acquired
exclusively with a view to resale. In the Consolidated State-
ments of Income, income (loss) from discontinued operations
is reported separately from income and expenses from con-
tinuing operations; prior periods are presented on a compara-
ble basis. In the Consolidated Statements of Cash Flow, the
cash flows from discontinued operations are presented sepa-
rately from cash flows of continuing operations; prior periods
are presented on a comparable basis. The disclosures in the
Notes to the Consolidated Financial Statements outside
NOTE  ACQUISITIONS, DISPOSITIONS AND DISCONTINUED OPERATIONS
that refer to the Consolidated Statements of Income and the
Consolidated Statements of Cash Flow relate to continuing
operations. Siemens reports discontinued operations separately
in NOTE  ACQUISITIONS, DISPOSITIONS AND DISCONTINUED OPERA-
TIONS. In order to present the financial effects of a discontinued
operation revenues and expenses arising from intragroup
transactions are eliminated except for those revenues and
expenses that are considered to continue after the disposal
of the discontinued operation. In any case no profit or loss is
recognized for intragroup transactions.
Siemens classifies a non-current asset or a disposal group as
held for disposal if its carrying amount will be recovered prin-
cipally through a sale transaction or through distribution to