Siemens 2006 Annual Report Download - page 223

Notes to Consolidated Financial Statements
(in millions of €, except where otherwise stated and per share amounts) 219
Similarly, decision-making regarding essential pension items is done centrally. As a conse-
quence, Group profit includes only amounts related to the service cost of pension plans, while
all other pension related costs (including charges for the German pension insurance associa-
tion and plan administration costs) are included in the line item Corporate items, pensions
and eliminations.
Furthermore, income taxes are excluded from Group profit since tax expense is subject to
legal structures which typically do not correspond to the structure of the Operations Groups.
The Managing Board also determined net capital employed as additional information to
assess the capital intensity of the Operations Groups. Its definition corresponds with the
Group profit measure. Net capital employed is based on total assets excluding intracompany
financing receivables and intracompany investments and tax related assets, as the correspon-
ding positions are excluded from Group profit (asset-based adjustments). The remaining
assets are reduced by non-interest bearing liabilities other than tax related liabilities (e.g.
accounts payable) and certain accruals (liability-based adjustments) to derive net capital
employed. The reconciliation of total assets to net capital employed is presented below.
Other Operations primarily refers to operating activities not associated with a Group and
certain centrally-held equity investments (such as BSH Bosch und Siemens Hausgeräte
GmbH), as well as to assets recently acquired as part of acquisitions for which the allocation to
the Groups are not yet finalized but excluding the investment in Infineon, which was included
in Corporate items prior to its sale (see Note 9 for further information). The Dematic business
was also included in Other Operations before a significant portion of it was sold (see Note 3 for
further information).
Reconciliation to financial statements
Reconciliation to financial statements includes items which are excluded from definition of
Group profit as well as costs of corporate headquarters.
Corporate items includes corporate charges such as personnel costs for corporate head-
quarters, the results of corporate-related derivative activities, as well as corporate projects
and non-operating investments. Pensions include the Company’s pension related income
(expenses) not allocated to the Groups. Eliminations represent the consolidation of trans-
actions within the Operations component.
Corporate items, pensions and eliminations in the column Group profit consists of:
In fiscal 2006, Corporate items include pre-tax gains of €33 and €15, respectively, from the
sale of the Company’s remaining interest in Infineon and Epcos (see Note 9).
In fiscal 2006, Pensions increased mainly due to a reduction in the discount rate assump-
tion at September 30, 2005, which was partly offset by a higher expected return on plan assets.
In fiscal 2005, Pensions decreased due to less amortization of unrecognized losses as well as
a higher expected return on plan assets which was primarily attributable to supplemental
contributions at the beginning of fiscal 2005. For more information related to the Company’s
pension plans, see Note 21.
Notes to Consolidated Financial Statements
Year ended
September 30,
2006 2005
Corporate items (616) (537)
Pensions (598) (519)
Eliminations (34) (16)
(1,248) (1,072)