Siemens 2013 Annual Report Download - page 328

92 A. To our Shareholders 117 B. Corporate Governance 155 C. Combined Management Report
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MEASUREMENT – SEGMENTS
Accounting policies for Segment information are generally the
same as those used for Siemens, described in NOTE  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES. Lease transactions, however,
are classified as operating leases for internal and segment
reporting purposes. Intersegment transactions are based on
market prices.
Profit of the Sectors and of Equity Investments:
Siemens’ Managing Board is responsible for assessing the per-
formance of the segments. The Company ’s profitability measure
of the Sectors and Equity Investments is earnings before financ-
ing interest, certain pension costs, and income taxes as deter-
mined by the chief operating decision maker (Profit). Profit ex-
cludes various categories of items, not allocated to the Sectors
and Equity Investments, which management does not regard as
indicative of their performance. Profit represents a performance
measure focused on operational success excluding the effects
of capital market financing issues; for financing issues regard-
ing Equity Investments see paragraph below. The major catego-
ries of items excluded from Profit are presented below.
Financing interest, excluded from Profit, is any interest income
or expense other than interest income related to receivables
from customers, from cash allocated to the Sectors and Equity
Investments and interest expenses on payables to suppliers.
Borrowing costs capitalized as part of qualifying long-term
projects are not part of financing interest. Financing interest is
excluded from Profit because decision-making regarding fi-
nancing is typically made at the corporate level. Equity Invest-
ments include interest and impairments as well as reversals of
impairments on long-term loans granted to investments re-
ported in Equity Investments.
Similarly, decision-making regarding essential pension items is
done centrally. Accordingly, Profit primarily includes amounts
related to service cost of pension plans only, while all other
regularly recurring pension related costs – including charges
for the German pension insurance association and plan admin-
istration costs – are included in line item Corporate items and
pensions. Curtailments are a partial payback with regard to
past service cost that affect Segment Profit.
Furthermore, income taxes are excluded from Profit since in-
come tax is subject to legal structures, which typically do not
correspond to the structure of the segments.
The effect of certain litigation and compliance issues is exclud-
ed from Profit, if such items are not indicative of the Sectors’
and Equity Investments’ performance, since their related re-
sults of operations may be distorted by the amount and the ir-
regular nature of such events. This may also be the case for
items that refer to more than one reportable segment, SRE and
(or) Centrally managed portfolio activities or have a corporate
or central character.
Central infrastructure costs are primarily allocated to the Sec-
tors. The total amount to be allocated is determined at the be-
ginning of the fiscal year and is charged in installments in all
four quarters.
Profit of Equity Investments mainly comprises income (loss)
from investments presented in Equity Investments, such as
the share in the earnings of associates or dividends from in-
vestments not accounted for under the equity method, income
(loss) from the sale of interests in investments, impairment of
investments and reversals of impairments. It also includes in-
terest and impairments as well as reversals of impairments on
long-term loans granted to investments reported in Equity In-
vestments.
Profit of the segment SFS:
Profit of the segment SFS is Income before income taxes.
In contrast to performance measurement principles applied
to the Sectors and Equity Investments interest income and
expenses is an important source of revenue and expense
of SFS.
Asset measurement principles:
Management determined Assets as a measure to assess capital
intensity of the Sectors and Equity Investments (Net capital
employed). Its definition corresponds to the Profit measure. It
is based on Total assets of the Consolidated Statements of
Financial Position, primarily excluding intragroup financing
receivables, intragroup investments and tax related assets,
since the corresponding positions are excluded from Profit. A
Division of Infrastructure & Cities includes the project-specific
intercompany financing of a long-term project. The remaining
assets are reduced by non-interest-bearing liabilities other
than tax related liabilities, e.g. trade payables, to derive Assets.
Equity Investments may include certain shareholder loans
granted to investments reported in Equity Investments. In con-
trast, Assets of SFS is Total assets.