Siemens 2014 Annual Report Download - page 264

108 A. To our Shareholders 131 B. Corporate Governance 171 C. Combined Management Report

Siemens is subject to legal and regulatory proceedings in vari-
ous jurisdictions. Such proceedings may result in criminal or
civil sanctions, penalties, damage claims and other claims, or
disgorgements against the Company. If it is more likely than
not that an obligation of the Company exists and will result in
an outflow of resources, a provision is recorded if the amount
of the obligation can be reliably estimated. Regulatory and
legal proceedings as well as government investigations often
involve complex legal issues and are subject to substantial un-
certainties. Accordingly, management exercises considerable
judgment in determining whether there is a present obligation
as a result of a past event at the end of the reporting period,
whether it is more likely than not that such a proceeding
will result in an outflow of resources and whether the amount
of the obligation can be reliably estimated. The Company
periodically reviews the status of these proceedings with both
inside and outside counsel. These judgments are subject to
change as new information becomes available. The required
amount of a provision may change in the future due to new
developments in the particular matter. Revisions to estimates
may significantly impact future net income. Upon resolution,
Siemens may incur charges in excess of the recorded provi-
sions for such matters. It cannot be excluded that the financial
position or results of operations of Siemens will be materially
affected by an unfavorable outcome of legal or regulatory pro-
ceedings or government investigations.
Income taxes – Siemens operates in various tax jurisdictions
and therefore has to determine tax positions under respective
local tax laws and tax authorities’ views which can be complex
and subject to different interpretations of tax payers and local
tax authorities. As an effect of tax audits, different interpreta-
tions of tax laws may result in additional tax payments for prior
years and are taken into account based on management’s
considerations. Deferred tax assets are recognized if sufficient
future taxable profit is available, including income from
forecasted operating earnings, the reversal of existing taxable
temporary differences and established tax planning opportuni-
ties. As of each period-end, management evaluates the
recover ability of deferred tax assets, based on projected future
taxable profits. As future developments are uncertain and
partly beyond management’s control, assumptions are neces-
sary to estimate future taxable profits as well as the period in
which deferred tax assets will recover. Estimates are revised in
the period in which there is sufficient evidence to revise the
assumption. If management considers it probable that all or a
portion of a deferred tax asset cannot be realized, that portion
would not be recognized.
NOTE  Acquisitions, dispositions
and discontinued operations
A) ACQUISITIONS
In September , Siemens has entered into an agreement
with Dresser-Rand to acquire all of its issued and outstanding
common shares by way of a friendly takeover bid. With its com-
prehensive portfolio of compressors, steam turbines, gas tur-
bines and engines, Dresser-Rand is a leading supplier for the
oil & gas, process, power and other industries in the related
energy infrastructure markets worldwide. The acquisition com-
plements Siemens’ existing offerings, notably for the global
oil & gas industry and for distributed power generation.
Siemens offers US$  per share in cash or US$ . billion in
total if the transaction is closed prior to March ,  (€ . bil-
lion as of September , ). Thereafter, the price increases
by US$ . per share or US$  million (€  million as of Sep-
tember , ) on the first day of each month starting
March ,  (ticking fee). As part of the transaction, Siemens
will assume Dresser-Rand’s net debt, currently estimated at
US$ . billion (€ . billion as of September , ), resulting
in a transaction volume without ticking fee of approximately
US$ . billion (approximately €  billion as of September ,
). The transaction is subject to approval by regulatory
authorities. Closing is expected in summer .
At the beginning of May , Siemens announced the acquisi-
tion of the Rolls-Royce Energy aero-derivative gas turbine
and compressor business of Rolls-Royce plc, U.K. (Rolls-Royce).
With the acquisition Siemens intends to strengthen its position
in the growing oil and gas industry as well as in the field of
decentralized power generation. The preliminary purchase
price amounts to £  million (€  billion as of September ,
). In addition, as part of the transaction, Siemens will pay
Rolls-Royce £  million (€  million as of September ,
) for a  year technology licensing agreement granting
exclusive access to future Rolls-Royce aero-turbine technology
developments in the four to  megawatt power output range
as well as preferred access to supply and engineering services
of Rolls-Royce. The regulatory authorities approved the trans-
action after fiscal year end. Closing is expected in the first quar-
ter of fiscal .