Siemens 2015 Annual Report Download - page 66

Consolidated Financial Statements

NOTE 1 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 Interna-
tional 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).
The Consolidated Financial Statements were authorized for is-
sue by the Managing Board on November , .
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.
NOTE 2 Summary of significant accounting
policies and critical accounting estimates
Certain of these accounting policies require critical accounting
estimates that involve complex and subjective judgments and
the use of assumptions, some of which may be for matters that
are inherently uncertain and susceptible to change. Such criti-
cal accounting estimates could change from period to period
and have a material impact on the Company’s results of opera-
tions, financial positions and cash flows. Critical accounting
estimates could also involve estimates where Siemens reason-
ably could have used a different estimate in the current account-
ing period. Siemens cautions that future events often vary from
forecasts and that estimates routinely require adjustment.
Basis of consolidation – The Consolidated Financial State-
ments include the accounts of Siemens AG and its subsidi aries
over which the Company has control. Siemens controls an in-
vestee if it has power over the investee. In addition, Siemens is
exposed to, or has rights to, variable returns from the involve-
ment with the investee and Siemens has the ability to use its
power over the investee to affect the amount of Siemens’ return.
Business combinations – Cost of an acquisition is measured
at the fair value of the assets given and liabilities incurred or
assumed at the date of exchange. 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. Non-controlling interests are
measured at the proportional fair value of assets acquired and
liabilities assumed (partial goodwill method). If there is no loss
of control, transactions with non-controlling interests are ac-
counted 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 option on
non-controlling interests the Company assesses whether the
prerequisites for the transfer of present ownership interest are
fulfilled at the balance sheet date. If 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 between share-
holders with the recognition of a purchase liability at the re-
spective exercise price. The non-controlling interests partici-
pate in profits and losses during the reporting period.
Associates – Associates are companies over which Siemens
has the ability to exercise significant influence over operating
and financial policies (generally through direct or indirect own-
ership of  % to  % of the voting rights). These are recorded
in the Consolidated Financial Statements using the equity
method and are initially recognized at cost. Siemens’ share of
its associate’s post-acquisition profits or losses is recognized in
the Consolidated Statements of Income, and its share of
post-acquisition changes in equity that have not been recog-
nized in the associate’s profit or loss is recognized directly in
equity. The cumulative post-acquisition changes are adjusted
against the carrying amount of the investment in the associ-
ate. When Siemens’ share of losses in an associate equals or
exceeds its interest in the associate, Siemens does not recog-
nize further losses, unless it incurs obligations or makes pay-
ments on behalf of the associate. The interest in an associate is
the carrying amount of the investment in the associate to-
gether with any long-term interests that, in substance, form
part of Siemens’ net investment in the associate.
Joint ventures – Joint ventures are entities over which
Siemens and one or more parties have joint control. Joint con-
trol requires unanimous consent of the parties sharing control
in decision making on relevant activities.
Foreign currency translation – assets and liabilities of for-
eign subsidiaries, where the functional currency is other than
the euro, are translated using the spot exchange rate at the end
of the reporting period, while the Consolidated Statements of
Income are translated using average exchange rates during the
period. Differences arising from such translations are recog-
nized within equity and reclassified to net income when the
gain or loss on disposal of the foreign subsidiary is recognized.
The Consolidated Statements of Cash Flow are translated at
average exchange rates during the period, whereas cash and
B. Notes to Consolidated Financial Statements