Siemens 2014 Annual Report Download - page 313

247 D. Consolidated Financial Statements 337 E. Additional Information
248 D. Consolidated Statements of Income
249 D. Consolidated Statements of Comprehensive Income
250 D. Consolidated Statements of Financial Position
251 D. Consolidated Statements of Cash Flows
252 D. Consolidated Statements of Changes in Equity
254 D. Notes to Consolidated Financial Statements
330 D. Supervisory Board and Managing Board
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Sectors and Equity Investments, which management does not
regard as indicative of their performance. Profit represents a
performance measure focused on operational success exclud-
ing the effects of capital market financing issues; for financing
issues regarding Equity Investments see paragraph below.
The major categories of items excluded from Profit are pre-
sented 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 finan-
cing 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
reported 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 reg-
ularly recurring pension related costs – including charges for
the German pension insurance association and plan adminis-
tration 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
income 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
excluded from Profit, if such items are not indicative of the
Sectors’ and Equity Investments’ performance, since their
related results of operations may be distorted by the amount
and the irregular 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
Sectors. The total amount to be allocated is determined at the
beginning 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 invest-
ments 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
interest and impairments as well as reversals of impairments
on long-term loans granted to investments reported in Equity
Investments.
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
Finan cial Position, primarily excluding intragroup financing
receivables, tax related assets and assets of discontinued
operations, 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. In contrast, Assets of SFS is Total assets.
Orders:
Orders are determined principally as estimated revenue of
accepted purchase orders and order value changes and adjust-
ments, excluding letters of intent. New orders are supplemen-
tary information, provided on a voluntary basis. It is not part of
the audited Consolidated Financial Statements.
Free cash flow definition:
Segment information discloses Free cash flow and Additions
to property, plant and equipment and intangible assets. Free
cash flow of the Sectors and Equity Investments constitutes
cash flows from operating activities less additions to intangi-
ble assets and property, plant and equipment. It excludes
Financing interest, except for cases where interest on qualify-
ing assets is capitalized or classified as contract costs and it
also excludes non-cash income tax as well as certain other
payments and proceeds. Free cash flow of Equity Investments
includes interest from shareholder loans granted to invest-
ments reported in Equity Investments. Pension curtailments
are a partial payback with regard to past service cost that
affect segment Free cash flow. Free cash flow of SFS, a finan-
cial services business, includes related financing interest pay-
ments and proceeds; income tax payments and proceeds of
SFS are excluded.