Siemens 2013 Annual Report Download - page 305

253 D. Consolidated Financial Statements 357 E. Additional Information
254 D.1 Consolidated Statements of Income
255 D.2 Consolidated Statements of Comprehensive Income
256 D.3 Consolidated Statements of Financial Position
257 D. Consolidated Statements of Cash Flows
258 D.5 Consolidated Statements of Changes in Equity
260 D.6 Notes to Consolidated Financial Statements
348 D.7 Supervisory Board and Managing Board

At the same time, Moody ’s affirmed our Aa long-term and our
P- short-term credit rating. The classification Aa is the second
highest category within Moody ’s long-term credit rating scale.
The numerical modifier  indicates a ranking in the lower end
of that category. The classification P- is the highest available
rating in the prime rating system of Moody ’s, which assesses
issuers’ ability to honor senior financial obligations and con-
tracts. It applies to senior unsecured obligations with an origi-
nal maturity of less than one year.
S&P made no rating changes in fiscal . S&P’s long-term
credit rating for Siemens is A+ and the rating outlook is stable.
Within S&P’s long-term credit rating scale, A is the third high-
est long-term rating category. The modifier + indicates that
our long-term debt ranks in the upper end of the A category.
Rating outlooks of S&P fall into the following four categories:
positive, negative, stable and developing. S&P’s short-term
rating is A-+, which is the highest rating within S&P’s short-
term rating scale.
NOTE  Commitments and contingencies
GUARANTEES AND OTHER COMMITMENTS
The following table presents the undiscounted amount of
maximum potential future payments for each major group of
guarantee:
September 30,
(in millions of €) 2013 2012
Guarantees
Credit guarantees 622 326
Guarantees of third-party performance 1,593 1,562
HERKULES obligations 1,890 2,290
Other 1,864 3,632
5,970 7,810
Item Credit guarantees cover the financial obligations of third
parties in cases where Siemens is the vendor and (or) contrac-
tual partner. These guarantees generally provide that in the
event of default or non-payment by the primary debtor,
Siemens will be required to settle such financial obligations. In
addition, Siemens provides credit guarantees generally as
guarantees for credit-lines with variable utilization to joint
ventures and associated and other companies accounted for
using the equity method. The maximum amount of these
guarantees is subject to the outstanding balance of the credit
or, in case where a credit line is subject to variable utilization,
the nominal amount of the credit line. These guarantees have
terms up to twelve years and five years, respectively, in fiscal
 and . Except for statutory recourse provisions against
the primary debtor, credit guarantees are generally not subject
to additional contractual recourse provisions. As of September
, , item credit guarantees include € million relating
to a reclassification of a disposal group from discontinued to
continuing operations. The Company accrued € million and
€ million, relating to credit guarantees as of September ,
 and , respectively.
Furthermore, Siemens issues guarantees of third-party per-
formance, which include performance bonds and guaran-
tees of advanced payments in cases where Siemens is the
general or subsidiary partner in a consortium. In the event of
non-fulfillment of contractual obligations by the consortium
partner(s), Siemens will be required to pay up to an agreed-
upon maximum amount. These agreements span the term of
the contract, typically ranging from three months to ten
years in fiscal  and seven years in fiscal . Generally,
consortium agreements provide for fallback guarantees as a
recourse provision among the consortium partners. As of
September ,  and , the Company accrued € mil-
lion and € million, respectively, relating to performance
guarantees.
In fiscal , The Federal Republic of Germany commissioned
a consortium consisting of Siemens and IBM Deutschland
GmbH (IBM) to modernize and operate the non-military in-
formation and communications technology of the German
Federal Armed Forces (Bundeswehr). This project is called
HERKULES. A project company, BWI Informationstechnik
GmbH (BWI), provides the services required by the terms of
the contract. Siemens is a shareholder in the project company.
The total contract value amounts to a maximum of approxi-
mately € billion. In connection with this project, Siemens
issued several guarantees connected to each other legally and
economically in favor of the Federal Republic of Germany and
of the consortium member IBM in December . The guar-
antees ensure that BWI has sufficient resources to provide the
required services and to fulfill its contractual obligations.
These guarantees are listed as a separate item HERKULES
obligations in the table above due to their compound and
multilayer nature. Total future payments potentially required
by Siemens amount to €. billion and €. billion as of
September ,  and , respectively and will be reduced
by approximately € million per year over the remaining
four-year contract period as of September , . Yearly
payments under these guarantees are limited to € million
plus, if applicable, a maximum of € million in unused guar-
antees carried forward from the prior year.