IAS 24 para 18, transactions, balances, commitments and guarantees with associates and joint ventures

Siemens AG – Annual report – 30 September 2020

Industry: manufacturing

NOTE 31 Related party transactions (extract)

Joint ventures and associates

Siemens has relationships with many joint ventures and associates in the course of business whereby

Siemens buys and sells a wide variety of products and services generally on arm’s length terms. The transactions between continuing operations and joint ventures and associates were as follows:

In fiscal 2020 and 2019, sales of goods and services and other income resulting from transactions between discontinued operations and joint ventures and associates amounted to € 391 million and € 641 million, respectively. Purchases of goods and services and other expenses resulting from transactions between discontinued operations and joint ventures and associates amounted to € 173 million and € 245 million, respectively.

As of September 30, 2020, receivables to associates included reimbursement rights against Siemens Energy totaling € 658 million. These rights were recognized correspondingly with obligations from customer contracts in connection with Siemens Energy activities legally remaining at Siemens. Liabilities to associates as of September 30, 2020 were mainly due to trade receivables that also result from these activities and that have economically to be allocated to Siemens Energy.

As of September 30, 2020 and 2019, guarantees to joint ventures and associates amounted to € 27,505 million and € 470 million, respectively, thereof € 27,253 million and € 142 million, respectively, to associates. Guarantees as of September 30, 2020 included mainly Siemens’ obligations from performance and credit guarantees in connection with the Siemens Energy business. For these guarantees, Siemens has reimbursement rights for the full amount.

As of September 30, 2020 and 2019, loans given to joint ventures and associates amounted to € 900 million and € 679 million, therein € 881 million and € 662 million related to joint ventures, respectively. The related book values amounted to € 26 million and € 481 million, therein € 20 million and € 477 million related to joint ventures, respectively. Valuation adjustments recognized in fiscal 2020 and 2019 reduced book values of loans related to joint ventures by € 744 million and € 100 million, respectively.

As of September 30, 2020 and 2019, the Company had commitments to make capital contributions to joint ventures and associates of € 62 million and € 145 million, therein € 51 million and € 127 million related to joint ventures, respectively.

As of September 30, 2020 and 2019, there were loan commitments to joint ventures amounting to € 299 million and € 361 million, respectively.

From the effective date of the spin-off, Siemens Energy is reported as an associate of Siemens. There are various relationships between Siemens and Siemens Energy in the ordinary course of business, such as purchases or sales of goods and services, leases, transfers under license agreements and cooperation in research and development.

Furthermore, Siemens Energy will continue to receive services from Siemens, particularly in the areas of information technology, human resources, communications, security and procurement as well as from Siemens Advanta, Global Business Services and Corporate Technology.

Additionally, Siemens and Siemens Energy concluded a non-exclusive Preferred Financing Agreement with a term until September 30, 2030 governing the cooperation in the areas of debt financing, commercial financing and equity financing of customers of the Siemens Energy business and their projects. Debt financing comprises the provision of debt capital via standard market debt financing structures. An investment volume of up to € 300 million per fiscal year has been committed by Siemens for the first five years. For a further five years, it was agreed to reinvest any sales revenue from the equity portfolio, but at least € 500 million. Moreover, equity financing can also be provided up to a total volume of € 210 million upon full recourse to Siemens Energy. Furthermore, a Preferred Financing Agreement with Siemens Gamesa Renewable Energy existed with a financing commitment of up to € 200 million per fiscal year for a period of five years until September 30, 2025.