Siemens 2013 Annual Report Download - page 323

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
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impaired on a portfolio basis in order to reflect losses incurred
within the respective portfolios. When substantial expected
payment delays become evident, overdue financial instru-
ments are assessed individually for additional impairment and
are further allowed for as appropriate.
NOTE  Share-based payment
Share-based payment awards at Siemens, including Bonus
Awards, Stock Awards, the Share Matching Program and its
underlying plans as well as the Jubilee Share Program are pre-
dominately designed as equity-settled plans and to a limited
extent as cash-settled plans. If participating Siemens compa-
nies cease to be part of the Siemens Group, they are no longer
eligible to participate in future share-based payment awards at
Siemens. In such cases the participating Siemens companies
have the right to settle the share-based payment awards pre-
maturely. Total pretax expense for share-based payment recog-
nized in line item Income from continuing operations amount-
ed to € million and € million for the years ended Sep-
tember ,  and , respectively, and refers primarily to
equity-settled awards, including the Company ’s Base Share
Program.
STOCK AWARDS
The Company grants stock awards as a means for providing
share-based compensation to members of the Managing
Board, members of the senior management of Siemens AG and
its domestic and foreign subsidiaries and other eligible em-
ployees. Stock awards are subject to a restriction period of
about four years and entitle the beneficiary to Siemens shares
without payment of consideration following the restriction pe-
riod. Stock awards granted in fiscal  to  were general-
ly subject to a restriction period of three years. In principle,
stock awards forfeit if the beneficiary ’s employment with the
Company terminates prior to the expiration of the restriction
period. During the restriction period, beneficiaries are not
entitled to dividends. Stock awards may not be transferred,
sold, pledged or otherwise encumbered. Settlement of stock
awards may occur in newly issued shares of capital stock of
Siemens AG, treasury shares or in cash. The settlement meth-
od will be determined by the Managing Board and the Super-
visory Board. Each fiscal year, the Company decides whether or
not to grant stock awards. The Supervisory Board decides
about the number of stock awards to the Managing Board and
the Managing Board decides about the number of stock awards
to members of the senior management and other eligible
employees.
Since fiscal , the allocation of stock awards as a share-
based payment has been increasingly tied to corporate perfor-
mance criteria. The target attainment for the performance
criteria ranges between % and %.
Half of the annual target amount for stock awards is based on
the average of earnings per share (EPS, basic) of the past three
fiscal years. The target attainment determines the number of
stock awards upon allocation. Settlement of these stock
awards is in shares following the four-year restriction period.
The other half of the annual target amount for stock awards is
based on the share price performance of Siemens shares rela-
tive to the share price performance of five important Siemens
competitors (ABB, General Electric, Philips, Rockwell, Schneider)
during the four-year restriction period. The target attainment
is determined during the four-year restriction period for the
stock awards and accordingly, determines the number of
Siemens shares ultimately transferred following the restriction
period. If the target attainment is up to %, settlement is in
shares. If the target attainment exceeds % (up to %) an
additional cash payment corresponding to the outperformance
results.
Additionally one portion of the variable compensation compo-
nent (bonus) for members of the Managing Board is granted in
the form of non-forfeitable awards of Siemens stock (Bonus
Awards).
Commitments to members
of the Managing Board
In fiscal  and , agreements were entered into which
entitle members of the Managing Board to stock awards con-
tingent upon attaining an EPS-based target. The fair value of
these entitlements amounting to € million in each of the
fiscal years  and , was determined by calculating the
present value of the target amount.
In fiscal  and , agreements were entered into which
entitle members of the Managing Board to stock awards con-
tingent upon attaining a prospective performance-based target
of Siemens stock relative to five competitors. The fair value of
these entitlements amounting to € million in each of the fis-
cal years  and , was calculated by applying a valuation
model. Inputs to that model include an expected weighted
volatility of Siemens shares of % in fiscal  and % in
fiscal  and a market price of €. in fiscal  and
€. in fiscal  per Siemens share. Expected volatility was
determined by reference to historic volatilities in fiscal 