Siemens 2014 Annual Report Download - page 259

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

Siemens reports discontinued operations separately in NOTE 
ACQUISITIONS, DISPOSITIONS AND DISCONTINUED OPERATIONS. In order
to present the financial effects of a discontinued operation, rev-
enue and expenses arising from intragroup transactions are
eliminated except for those revenue and expenses that are con-
sidered to continue after the disposal of the discontinued oper-
ation. In any case, no profit or loss is recognized for intragroup
transactions.
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 or through distribution to
shareholders rather than through continuing use. For this to be
the case, the asset or disposal group must be available for im-
mediate sale or distribution in its present condition subject
only to terms that are usual and customary for sales or distribu-
tions of such assets or disposal groups and its sale or distribu-
tion must be highly probable. The disclosures in the Notes to
Consolidated Financial Statements outside NOTE  ACQUISI-
TIONS, DISPOSITIONS AND DISCONTINUED OPERATIONS that refer to the
Consolidated Statements of Financial Position generally relate
to assets that are not held for disposal. Siemens reports
non-current assets or disposal groups held for disposal sepa-
rately in NOTE  ACQUISITIONS, 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, unless these items pre-
sented in the disposal group are not part of the measurement
scope as defined in IFRS , Non-current Assets held for Sale and
Discontinued Operations.
Income taxes – The Company applies IAS , Income taxes.
Current taxes are calculated based on the profit (loss) of the
fiscal year and in accordance with local tax rules of the tax
jurisdiction respectively. Expected and executed additional tax
payments respectively tax refunds for prior years are also taken
into account. Under the liability method, deferred 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. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the income
statement, unless related to items directly recognized in equity,
in the period the new laws are enacted or substantively
enacted. Deferred tax assets are recognized to the extent that it
is probable that future taxable income will be available against
which the deductible temporary differences, unused tax losses
and unused tax credits can be utilized.
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. Production costs comprise direct material
and labor and applicable manufacturing overheads, including
depreciation charges. Net realizable value is the estimated sell-
ing price in the ordinary course of business, less the estimated
costs of completion and selling expenses.
Defined benefit plans – Siemens measures the entitlements
of the defined benefit plans by applying the projected unit
credit method. The approach reflects an actuarially calculated
net present value of the future benefit entitlement for services
already rendered. In determining the net present value of the
future benefit entitlement for service already rendered (Defined
Benefit Obligation (DBO)), Siemens considers future compensa-
tion and benefit increases, because the employee’s final benefit
entitlement at regular retirement age depends on future com-
pensation or benefit increases. 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 at the preceding fiscal year’s period-end date. The fair
value of plan assets and DBO and thus the interest income on
plan assets and the interest expenses on DBO are adjusted for
significant events after the preceding fiscal year end, such as a
supplemental funding, plan changes or business combinations
and disposals. The DBO includes the present value from the
effects of taxes payable by the plan on contributions or bene-
fits relating to services already rendered.
Service cost and past service cost for post-employment benefits
as well as other administration costs which are unrelated to the
management of plan assets are allocated among functional
costs (line items Cost of sales, Research and development
expenses, Selling and general administrative expenses) follow-
ing the functional area of the corresponding profit and cost
centers. Past service cost and settlement gains (losses) are rec-
ognized immediately in profit or loss when the plan amend-
ment, curtailment or settlement occurs. Administration Costs
which are related to the management of plan assets and taxes
directly linked to the return on plan assets and payable by the
plan itself are included in the return on plan assets and are rec-
ognized in Other comprehensive income, net of income taxes.
For unfunded plans, Siemens recognizes a post-employment
benefit liability equal to the DBO. For funded plans, Siemens
offsets the fair value of the plan assets with the benefit obliga-
tions. Siemens recognizes the net amount, after adjustments
for effects relating to any asset ceiling, in line item Post- employ-
ment benefits or in line item Other current assets.
Remeasurements comprise actuarial gains and losses, resulting
for example from an adjustment of the discount rate, as well as