Siemens 2014 Annual Report Download - page 192

108 A. To our Shareholders 131 B. Corporate Governance 171 C. Combined Management Report
172 C. Business and economic environment
187 C. Financial performance system
193 C. Results of operations
205 C. Financial position
210 C. Net assets position

Year ended September ,
(in millions of €)  
Income from continuing operations before interest after tax
Net income 5,507 4,409
Less: Other interest expenses / income, net (606) (455)
Plus: SFS Other interest expenses / income  630 556
Plus: Net interest expenses from post-employment benefits 295 297
Less: Taxes on interest adjustments  (87) (111)
Income before interest after tax 5,739 4,695
Less: Income from discontinued operations, net of income taxes (108) (231)
Income from continuing operations before interest after tax 5,632 4,465
Return on capital employed (ROCE) (continuing and discontinued operations)
(I) Income before interest after tax 5,739 4,695
(II) Average capital employed (continuing and discontinued operations)  33,219 34,831
(I) / (II) ROCE (continuing and discontinued operations) 17.3% 13.5%
Return on capital employed (ROCE) (continuing operations)
(I) Income from continuing operations before interest after tax 5,632 4,465
(II) Average capital employed (continuing operations)  32,777 32,583
(I) / (II) ROCE (continuing operations) 17.2% 13.7%
1 SFS Other interest expenses / income is included in Other
interest expenses / income, net. Adding back SFS Other
interest expenses / income in the numerator corresponds
to the adjustment for SFS Debt in the denominator.
2 Effective tax rate for the determination of taxes on
interest adjustments is calculated by dividing Income
tax expenses by Income from continuing operations
before income taxes, both as reported in D. CON-
SOLIDATED STATEMENTS OF INCOME.
3 Average capital employed for a fiscal year is determined
as a five-point average in capital employed of the
respective quarters starting with the capital employed
as of September  of the previous fiscal year.
C... DEFINITIONS OF OTHER
FINANCIAL MEASURES
We also use other financial measures in addition to the mea-
sures described above, such as orders and order backlog for the
assessment of our future revenue potential. We define and cal-
culate orders and order backlog as follows:
Under our policy for the recognition of orders, we generally
recognize the total contract amount for an order when we enter
into a contract that we consider legally effective and compul-
sory based on a number of different criteria. The contract
amount is the agreed price or fee for that portion of the contract
for which the delivery of goods and / or the provision of services
has been irrevocably agreed. Future revenue from long-term
service, maintenance and outsourcing contracts is recognized
as orders in the amount of the total contract value only if there
is adequate assurance that the contract will remain in effect for
its entire duration (e.g., due to high exit barriers for the cus-
tomer). Orders are generally recognized immediately when the
relevant contract is considered legally effective and compul-
sory. The only exceptions are orders with short overall contract
terms. In this case, a separate reporting of orders would provide
no significant additional information regarding our perfor-
mance. For orders of this type, the recognition of orders thus
occurs when the corresponding revenue is recognized.
Order backlog represents an indicator for the future revenues
of our Company resulting from already recognized orders. Order
backlog is calculated by adding the orders of the current fiscal
year to the balance of the order backlog as of the end of the
prior fiscal year and then subtracting the revenue recognized in
the current fiscal year. If the amount of an order already recog-
nized in the current or the previous fiscal years is modified or
if an order from the current fiscal year is cancelled, we adjust
orders for the current quarter and also our order backlog
accordingly, but do not retroactively adjust previously pub-
lished orders. However, if an order from a previous fiscal year is
cancelled, orders of the current quarter and, accordingly, the
current fiscal year are generally not adjusted; instead, the exist-
ing order backlog is revised directly. Aside from cancellations,
the order backlog is also subject to currency translation and
portfolio effects.
There is no standard system for compiling and calculating or-
ders and order backlog information that applies across compa-
nies. Accordingly, our orders and order backlog may not be
comparable with orders and order backlog measures reported
by other companies. We subject our orders and our order back-
log to internal documentation and review requirements. We
may change our policies for recognizing orders and order back-
log in the future without previous notice.