Siemens 2014 Annual Report Download - page 306

108 A. To our Shareholders 131 B. Corporate Governance 171 C. Combined Management Report

€ , million, respectively, mainly in the form of inventories
and receivables. Credit risks arising from credit guarantees are
described in NOTE  COMMITMENTS AND CONTINGENCIES . There
were no significant concentrations of credit risk as of Septem-
ber ,  and .
Concerning trade receivables and other receivables, as well as
loans or receivables included in line item Other financial assets
that are neither impaired nor past due, there were no indica-
tions as of September , , that defaults in payment obliga-
tions will occur, which lead to a decrease in the net assets of
Siemens. Overdue financial instruments are generally impaired
on a portfolio basis in order to reflect losses incurred within
the respective portfolios. When substantial expected payment
delays become evident, overdue financial instruments 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
under lying 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
amounted to €  million and €  million for the years ended
September ,  and , respectively, and refers primar-
ily 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
employees. 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
period. Stock awards granted in fiscal  to  were gener-
ally 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 method
will be determined by the Managing Board and the Supervisory
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
relative 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 com-
ponent (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
The remuneration system for the Managing Board was revised
by the Supervisory Board, effective as of fiscal , which
is explained in detail in the Compensation Report within the
Corporate Governance Report.
In fiscal  and , agreements were entered into which
entitle members of the Managing Board to stock awards contin-
gent upon attaining an EPS-based target. The fair value of these
entitlements amounting to €  million and €  million, respec-
tively, in fiscal  and , was determined by calculating
the present value of the target amount.