Siemens 2015 Annual Report Download - page 69

Consolidated Financial Statements 
estimates in determining the assets’ recoverable amount which
can have a material impact on the respective values and ulti-
mately the amount of any impairment.
Discontinued operations and non-current assets held for
disposal – Discontinued operations are reported when a com-
ponent of an entity is classified as held for disposal or has been
disposed of, if the component represents a separate major line
of business or geographical area of operations and is part of
a single co-ordinated plan to dispose of a separate major line of
business or geographical area of operations. In the Consoli-
dated Statements of Income, income (loss) from discontinued
operations is reported separately from income and expenses
from continuing operations; prior periods are presented on
a comparable basis. In the Consolidated Statements of Cash
Flow, the cash flows from discontinued operations are pre-
sented separately from cash flows of continuing operations;
prior periods are presented on a comparable basis. The disclo-
sures in the Notes to the Consolidated Financial Statements
outside NOTE 3 ACQUISITIONS, DISPOSITIONS AND DISCONTINUED
OPERATIONS that refer to the Consolidated Statements of Income
and the Consolidated Statements of Cash Flow relate to con-
tinuing operations.
Siemens classifies a non-current asset or a disposal group as
held for disposal if its carrying amount will be recovered princi -
pally through a sale transaction rather than through continu-
ing use. The disclosures in the Notes to Consolidated Financial
Statements outside NOTE 3 ACQUISITIONS, DISPOSITIONS AND
DISCONTINUED OPERATIONS that refer to the Consolidated State-
ments of Financial Position generally relate to assets that are
not held for disposal. Siemens reports non-current assets or
disposal groups held for disposal separately in NOTE 3 ACQUI-
SITIONS, DISPOSITIONS AND DISCONTINUED OPERATIONS. Non-current
assets classified as held for disposal and disposal groups are
measured at the lower of their carrying amount and fair value
less costs to sell. Depreciation and amortization ceases. The
determination of the fair value less costs to sell includes the
use of estimates and assumptions that tend to be uncertain.
Income taxes – Tax positions under respective local tax laws
and tax authorities’ views can be complex and subject to differ-
ent interpretations of tax payers and local tax authorities.
Different interpretations of tax laws may result in additional tax
payments for prior years and are taken into account based on
management’s considerations. Under the liability method, de-
ferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets are recog-
nized if sufficient future taxable profit is available, including
income from forecasted operating earnings, the reversal of
existing taxable temporary differences and established tax
planning opportunities. As of each period-end, Siemens evalu-
ates the recoverability of deferred tax assets, based on pro-
jected future taxable profits. Based upon the level of historical
taxable income and projections for future taxable income over
the periods in which the deferred tax assets are deductible,
Siemens believes it is probable the Company will realize the
benefits of these deductible differences. As future develop-
ments are uncertain and partly beyond Siemens’s control,
assumptions are necessary 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.
Inventories – Inventories are valued at the lower of acquisi-
tion or production costs and net realizable value, costs being
generally determined on the basis of an average or first-in, first-
out method.
Defined benefit plans – Siemens measures the entitlements
by applying the projected unit credit method. The approach re-
flects an actuarially calculated net present value of the future
benefit entitlement for services already rendered. In determin-
ing the net present value of the future benefit entitlement for
service already rendered (Defined Benefit Obligation (DBO)),
the expected rates of future salary increase and expected rates
of future pension progression are considered. The assumptions
used for the calculation of the DBO as of the period-end of the
preceding fiscal year are used to determine the calculation of
service cost and interest income and expense of the following
year. The net interest income or expense for the fiscal year will
be based on the discount rate for the respective year multiplied
by the net liability (asset) at the preceding fiscal year’s peri-
od-end date.
Service cost and past service cost for post-employment benefits
and administration costs unrelated to the management of plan
assets are allocated among functional costs. Past service cost
and settlement gains (losses) are recognized immediately in
profit or loss. For unfunded plans, the amount of line item
Post-employment benefits equals the DBO. For funded plans,
Siemens offsets the fair value of the plan assets with the DBO.
Siemens recognizes the net amount, after adjustments for
effects relating to any asset ceiling.
Remeasurements comprise actuarial gains and losses as well as
the difference between the return on plan assets and the
amounts included in net interest on the net defined benefits
liability (asset) and are recognized in Other comprehensive
income, net of income taxes.