Siemens 2013 Annual Report Download - page 267

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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shareholders rather than through continuing use. For this to
be the case, the asset or disposal group must be available for
immediate sale or distribution in its present condition subject
only to terms that are usual and customary for sales or dis-
tributions of such assets or disposal groups and its sale or
distribution must be highly probable. The disclosures in the
Notes to Consolidated Financial Statements outside NOTE 
ACQUISITIONS, DISPOSITIONS AND DISCONTINUED OPERATIONS that
refer to the Consolidated Statements of Financial Position
generally relate to assets that are not held for disposal.
Siemens reports non-current assets or disposal groups held for
disposal separately in NOTE  ACQUISITIONS, DISPOSITIONS AND
DISCONTINUED OPERATIONS. Non-current assets classified as held
for disposal and disposal groups are measured at the lower of
their carrying amount and fair value less costs to sell, unless
these items presented in the disposal group are not part of the
measurement scope as defined in IFRS , Non-current Assets
held for Sale and Discontinued Operations.
Income taxes – The Company applies IAS , Income taxes.
Current taxes are calculated based on the profit (loss) of the
fiscal year and in accordance with local tax rules of the tax ju-
risdiction respectively. Expected and executed additional tax
payments respectively tax refunds for prior years are also tak-
en into account. Under the liability method, deferred tax as-
sets and liabilities are recognized for future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their re-
spective tax bases. The effect on deferred tax assets and liabili-
ties of a change in tax rates is recognized in the income state-
ment, unless related to items directly recognized in equity, in
the period the new laws are enacted or substantively enacted.
Deferred tax assets are recognized to the extent that it is prob-
able that future taxable income will be available against which
the deductible temporary differences, unused tax losses and
unused tax credits can be utilized.
Inventories – Inventories are valued at the lower of acquisi-
tion or production costs and net realizable value, costs being
generally determined on the basis of an average or first-in,
first-out method. Production costs comprise direct material
and labor and applicable manufacturing overheads, including
depreciation charges. Net realizable value is the estimated sell-
ing price in the ordinary course of business, less the estimated
costs of completion and selling expenses.
Defined benefit plans – Siemens measures the entitlements
of the defined benefit plans by applying the projected unit
credit method. The approach reflects an actuarially calculated
net present value of the future benefit entitlement for services
already rendered. In determining the net present value of
the future benefit entitlement for service already rendered
(Defined Benefit Obligation (DBO)), Siemens considers future
compensation and benefit increases, because the employee’s
final benefit entitlement at regular retirement age depends on
future compensation or benefit increases. The assumptions
used for the calculation of the DBO as of the period-end of the
preceding fiscal year are used to determine the calculation of
service cost and interest income and expense of the following
year. The net interest income or expense for the fiscal year will
be based on the discount rate for the respective year multi-
plied by the net liability at the preceding fiscal year’s peri-
od-end date. The fair value of plan assets and DBO and thus
the interest income on plan assets and the interest expenses
on DBO are adjusted for significant events after the fiscal year
end, such as a supplemental funding, plan changes or busi-
ness combinations and disposals. The DBO includes the pres-
ent value from the effects of taxes payable by the plan on con-
tributions or benefits relating to services already rendered.
Service cost and past service cost for post-employment bene-
fits as well as other administration costs which are unrelated
to the management of plan assets are allocated among func-
tional costs (line items Cost of sales, Research and develop-
ment expenses, Selling and general administrative expenses)
following the functional area of the corresponding profit and
cost centers. Past service cost and settlement gains (losses)
are recognized immediately in profit or loss when the plan
amendment, curtailment or settlement occurs. Administration
Costs which are related to the management of plan assets and
taxes directly linked to the return on plan assets and payable
by the plan itself are included in the return on plan assets and
are recognized in Other comprehensive income, net of income
taxes. For unfunded plans, Siemens recognizes a post-employ-
ment benefit liability equal to the DBO. For funded plans,
Siemens offsets the fair value of the plan assets with the bene-
fit obligations. Siemens recognizes the net amount, after ad-
justments for effects relating to any asset ceiling, in line item
Post-employment benefits or in line item Other current assets.
Remeasurements comprise actuarial gains and losses, result-
ing for example from an adjustment of the discount rate, as
well as the difference between the return on plan assets and
the amounts included in net interest on the net defined bene-
fits liability (asset) and are recognized in Other comprehensive
income, net of income taxes.
Provisions – A provision is recognized in the Statement of
Financial Position when the Company has a present legal or
constructive obligation as a result of a past event, it is probable
that an outflow of economic benefits will be required to settle
the obligation and a reliable estimate can be made of the
amount of the obligation. If the effect is material, provisions
are recognized at present value by discounting the expected