Siemens 2014 Annual Report Download - page 254

108 A. To our Shareholders 131 B. Corporate Governance 171 C. Combined Management Report
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NOTE  Basis of presentation
The accompanying Consolidated Financial Statements present
the operations of Siemens AG with registered offices in Berlin
and Munich, Germany, and its subsidiaries (the Company or
Siemens). They have been prepared in accordance with Inter-
national Financial Reporting Standards (IFRS), as adopted by the
European Union as well as with the additional requirements set
forth in Section a () of the German Commercial Code (HGB).
The financial statements are also in accordance with IFRS as
issued by the International Accounting Standards Board (IASB).
Siemens prepares and reports its Consolidated Financial State-
ments in euros (€). Due to rounding, numbers presented may
not add up precisely to totals provided.
Siemens is a German based multinational technology company
with core activities in the fields of electrification, automation
and digitalization.
The Consolidated Financial Statements were authorized for
issue by the Managing Board on November , . The Con-
solidated Financial Statements are generally prepared on the
historical cost basis, except as stated in NOTE  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES.
NOTE  Summary of significant
accounting policies
The accounting policies set out below have been applied con-
sistently to all periods presented in these Consolidated Finan-
cial Statements.
Basis of consolidation – The Consolidated Financial State-
ments include the accounts of Siemens AG and its subsidiaries
over which the Company has control. Siemens controls an in-
vestee if it has power over the investee that is, Siemens has
existing rights that give Siemens the current ability to direct
the relevant activities, which are the activities that significantly
affect Siemens’ return. In addition, Siemens is exposed to, or
has rights to, variable returns from the involvement with
the investee and Siemens has the ability to use its power over
the investee to affect the amount of Siemens’ return. When
Siemens holds less than the majority of voting rights, other
facts and circumstances including contractual arrangements
that give Siemens power over the investee may result in the
Company controlling the investee. Siemens reassesses whether
it controls an investee if, and when, facts and circumstances
indicate that there are changes to the elements evidencing
control. Consolidation begins when the Company obtains
control of the subsidiary and ceases from the date that Siemens
loses control of the subsidiary. For Consolidated Financial
Statements, all assets, liabilities, income, expenses and cash
flows of Siemens AG with those of its subsidiaries are com-
bined. Intra-group transactions are eliminated in full.
Business combinations – Business combinations are ac-
count ed for under the acquisition method. Siemens as the
acquirer and the acquiree may have a relationship that existed
before they contemplated the business combination, referred to
as a pre-existing relationship. If the business combination in
effect settles a pre-existing relationship, Siemens as the ac-
quirer recognizes a gain or loss for the pre-existing relationship.
The cost of an acquisition is measured at the fair value of the
assets given and liabilities incurred or assumed at the date of
exchange. Any contingent consideration to be transferred by
Siemens as the acquirer will be recognized at fair value at the
acquisition date. Subsequent changes to the fair value of the
contingent consideration that is deemed to be an asset or liabil-
ity will be recognized either in profit or loss or as a change to
other comprehensive income. If the contingent consideration
is classified as equity, it will not be remeasured; subsequent
settle ment is accounted for within equity. Acquisition-related
costs are expensed in the period incurred. Identifiable assets
acquired and liabilities assumed in a business combination
( including contingent liabilities) are measured initially at their
fair values at the acquisition date, irrespective of the extent of
any non-controlling interest. Uniform accounting policies are
applied. Non-controlling interests may be measured at their fair
value (full goodwill method) or at the proportional fair value
of assets acquired and liabilities assumed (partial goodwill
method). After initial recognition non-controlling interests may
show a deficit balance since both profits and losses are allocated
to the shareholders based on their equity interests. In business
combinations achieved in stages, any previously held equity
interest in the acquiree is remeasured to its acquisition date fair
value. If there is no loss of control, transactions with non-con-
trolling interests are accounted for as equity transactions not
affecting profit and loss. At the date control is lost, any retained
equity interests are remeasured to fair value. In case of a written
put on non-controlling interests the Company distinguishes
whether the prerequisites for the transfer of present ownership
interest are fulfilled at the balance sheet date. Provided that the
Company is not the beneficial owner of the shares underlying
the put option, the exercise of the put option will be assumed at
each balance sheet date and treated as equity transaction be-
tween shareholders with the recognition of a purchase liability
at the respective exercise price. The non-controlling interests
participate in profits and losses during the reporting period.
Associates and joint ventures – Associates are companies
over which Siemens has the ability to exercise significant
influence over operating and financial policies (generally
D. Notes to Consolidated Financial Statements