Consolidation Group.
In addition to the parent company Wincor Nixdorf AG, the Group financial statements as of September 30, 2006 essentially include all domestic and foreign subsidiaries in which Wincor Nixdorf AG possesses, either directly or indirectly, over 50% of the shares or voting rights.

Other changes in shareholdings and changes as a result of new foundations and business unit takeovers were as follows:

• By means of a purchase agreement as of January 13, 2006, Wincor Nixdorf acquired the remaining 49.99% interest in Siemens Nixdorf B.V., The Hague, the Netherlands, for a consideration of €454k. The purchase price was paid during fiscal 2005/2006. The contributable equity as of January 13, 2006, came to €2,170k. The resulting excess amount of €1,716k has been immediately recognized as other operating income in profit and loss, as at the time of acquisition no future risks from the acquisition were apparent. The entity has been renamed to Wincor Nixdorf B.V.
  
  The entity’s share in the net profit for the period is €690k.
  
  
• With effect May 1, 2006, 100% of the shares in HEROS Security Nederland B.V., Rotterdam, the Netherlands, have been acquired for a purchase price of €390k (part of bankrupt's estate of HEROS Transport GmbH, Hanover, Germany). The purchase price has been paid during fiscal 2005/2006. Subsequently, the entity was renamed to SecurCash B.V. The entity offers cash management for automated teller machines within outsourcing contracts. The entity has been fully consolidated into the Wincor Nixdorf Group financial statements for the first time on May 1, 2006. The contributable equity as of May 1, 2006, came to €1,109k. The resulting excess amount of €719k has been immediately recognized as other operating income in profit and loss. The excess amount has been mainly used up by starting losses during the current fiscal year. Acquired assets and liabilities have no material effect on the Group financial statements.
  
  The entity’s share in the net profit for the period is €–713k.
  
  
• Effective September 29, 2006, the French subsidiaries Wincor Nixdorf S.A., Nanterre, France, and Wincor Nixdorf Systèmes Bancaires S.A.S., Plaisir, France, have been merged. The merged entity operates under Wincor Nixdorf SAS, Montigny le Bretonneux, France. The merger had no effect on the Group’s performance, financial position and cash flows.

In addition, the following new foundations took place in fiscal 2006:

• Wincor Nixdorf Retail Services GmbH, Paderborn, subscribed capital of €25k
• Wincor Nixdorf Grundstücksverwaltung Ilmenau GmbH & Co. KG, Paderborn, limited partner's capital interest of €10k
• Wincor Nixdorf (Thailand) Co., Ltd., Bangkok, Thailand, subscribed capital of THB 38,000k
• Wincor Nixdorf EURL, Algiers, Algeria, subscribed capital of DZD 10,000k
  
  As a result, the consolidation group at the year-end was made up of 61 companies, including Wincor Nixdorf AG, Paderborn.

Had the acquisition date of the newly acquired entity been effected on October 1, 2005, Group net sales would have been €234k higher. The effects of an earlier acquisition date on Group profit are of minor importance.

Consolidation Principles.
The Group financial statements are based on the annual accounts of companies forming part of the Group, such accounts having been compiled under uniform Group rules as of September 30, 2006 and, for the comparative period, as of September 30, 2005, duly audited and approved by KPMG. By departure from this, we have used audited interim accounts in respect of four companies, as local statutory requirements dictate that these companies have fiscal years ending December 31.

Capital consolidation was carried out using the purchase method in accordance with IFRS 3 for all acquisitions after October 1, 2003. The approach of quoting shares in the affiliated companies at their book value in the parent company is replaced by the assets at their settlement value and the debts of the consolidated companies. In this way, subsidiary companies’ equity is compared with the book value of the shares held by the parent company.

Goodwill arising from initial consolidation is no longer amortized on a scheduled basis since October 1, 2003. Moreover, goodwill is tested for impairment annually or if an indication for impairment exists and eventually an impairment loss is recorded.

The interests in subsidiary companies which are not attributable to the parent company are shown within Group equity as “minority interest”. Other shareholders’ interests are calculated on the basis of the book values of the assets and liabilities attributable to them.

Mutual receivables and payables between companies included in the consolidated accounts are offset against each other.

Intra-group income and expenses are consolidated without effect on profit.

Intercompany profits arising from intra-group delivery of goods and services are eliminated with a corresponding effect on profit.

On consolidation transactions with effect on profit deferred taxes are applied.

Currency Translation.
Annual accounts prepared in foreign currencies have been converted using the functional currency method. The functional currency is the currency in which a foreign entity primarily operates or settles payments. As Wincor Nixdorf Group companies undertake business dealings financially, economically and organizationally independently, the functional currency is in general identical with the local currency. However, in the case of Wincor Nixdorf C.A., Venezuela, Wincor Nixdorf Pte. Ltd., Singapore, as well as Wincor Nixdorf S.A. de C.V., Mexico City, Mexico, and Wincor Nixdorf IT Support S.A. de C.V., Mexico City, Mexico, the U.S. dollar and in the case of Wincor Nixdorf Bilgisayar Sistemleri A.S., Ayazaga, Turkey, the euro is used as the functional currency, since these currencies influence the purchase and sales prices for goods and services of the foreign entity.

Balance sheet items, including goodwill, are converted at the mid exchange rate applicable on the balance sheet date, and income and expenses on the statement of income are converted using average exchange rates (annual averages). The variance so arising is offset against shareholders’ equity without affecting profit.

In the individual company reports included, foreign currency transactions are recorded at the exchange rates applicable at the time of the transactions. Monetary items in foreign currency (cash and cash equivalents, receivables and payables) are valued at the mid exchange rate on the balance sheet date. The exchange rate profits or losses arising from the valuation or transaction of monetary items are shown in the statement of income. Non-monetary items are translated using historical exchange rates.

The foreign exchange rates of the significant currencies for the Wincor Nixdorf Group have developed as follows:

Accounting & Valuation Principles.
Assets and liabilities have been valued at historical acquisition/production cost, with the exception of equity investments, securities classified as “available-for-sale” and “held for trading” and derivatives, which have been included at their relevant market valuations.

In compiling the Group financial statements, assumptions have been made, and estimates used, which have affected the value and reporting of capitalized assets and liabilities, of income and expenditure and of contingent liabilities. The assumptions and estimates mainly relate to Group-wide setting of standard economic utilization periods of fixed asset items, to the valuation of inventories, to assumptions for the valuation of pension commitments, to capitalization and valuation of other accruals and also to the ability of future tax benefits to be realized. The actual values may vary in individual instances from the assumptions and estimates made. Changes are incorporated, with a corresponding effect on profit, once improved knowledge is obtained.

Intangible Assets.
Intangible assets are accounted for at cost and, as the useful lives are finite, amortized in a scheduled manner in equal annual amounts over the relevant utilization period. The amortization period for commercial patents, licenses and product know-how is a maximum of ten years. The remaining useful life of the product know-how is two years.

According to IFRS 3, goodwill is no longer amortized on a scheduled basis but only if a need for impairment loss exists.

Property, Plant and Equipment.
Property, plant and equipment are valued at cost of acquisition or production, less scheduled amortization. Production costs include direct costs as well as proportionate indirect costs. Business and factory premises are amortized over a maximum of 50 years, plant and machinery over an average of ten years, other fixed assets and office equipment mainly over five years and products leased to customers as per the terms of the relevant contract. Property, plant and equipment are mainly depreciated using the straight-line method in accordance with economic utilization. Plant and machinery and other fixed assets and office equipment used in the production process are written down using front-loaded depreciation rates as a result of multi-shift operations. If parts of single assets have different useful lives, they are separately depreciated on a scheduled basis.

Investments.
In accordance with IAS 39 “Financial Instruments: Recognition and Measurement”, investments are considered to be financial assets. They are carried at fair value. Subsequent measurement of recognized loans to employees occurs on the basis of amortized cost, as these items are classified as “held-to-maturity”.

Reworkable Service Parts and Current Inventories.
Reworkable service parts and current inventories are valued at purchase or production cost, or at lower net realizable value.

The purchase cost of reworkable service parts, raw materials, supplies and merchandise is calculated using the average valuation method.

In accordance with IAS 2 “Inventories”, pro-rata material costs and production overheads (assuming normal utilization), including depreciation on production equipment and production-related social security costs, are included along with production material and production wages in the production cost of reworkable service parts, finished and unfinished products. Interest on loan capital is not capitalized.

Write-downs for inventory risks are undertaken to an appropriate and adequate extent. Account was taken for loss-free valuation. Lower net realizable values are used where required.

As of the balance sheet date, there were no substantial orders that would require capitalization in accordance with IAS 11 “Construction Contracts”.

Trade Receivables and Other Assets.
Receivables and other assets are valued at nominal value or at amortized costs. Provisions for bad debts are considered if an indication for a default in payment exists. The amounts are estimated on the basis of past experience. The expenses are recorded in profit and loss under the functional cost headings.

Cash and Cash Equivalents.
Cash and cash equivalents include marketable securities as well as cash in hand and cash at bank (including checks).

Securities are financial assets according to IAS 39 and contain securities classified as “available-for-sale” and “held for trading”. They are valued at fair value. In order to determine the fair value of marketable securities at the balance sheet date respective quotations of banks have been obtained as well as market prices of trading systems have been used. Changes in value of the securities classified as “held for trading” are recorded in finance income and finance costs. Changes in securities classified as “available- for-sale” are recorded in the revaluation reserve within equity under consideration of deferred tax effects. At the selling date, realized gains or losses are recorded in finance income or finance costs.

Purchases and sales of securities are accounted for with the settlement price at trade date.

Liquid funds are accounted for at par value. Foreign currency stocks are valued at their mid-price on the balance sheet date.

In the current fiscal year, time deposits were temporarily held with banks. At the same time, collateralization of these funds by the counterparties took place in the form of shares with corresponding dividend income; in parallel, expenses were incurred in connection with the aforementioned transactions. Income and expense attributable to these transactions are carried separately under the appropriate income and expense items of finance income and finance costs.

Accruals & Liabilities.
Pension accruals in respect of employees’ and pensioners’ pension entitlements are created using actuarial principles and biometric data corresponding to the Projected Unit Credit method. This method takes account not only of known pensions and known earned future pension entitlements at the balance sheet date, but also of expected future increases in pensions and salaries having estimated the relevant influencing factors. Under this system, actuarial gains and losses are reported immediately in the relevant year’s net profit. Pension-like liabilities are valued along the same lines.

In accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, accruals are created on the balance sheet in respect of legal or actual obligations where the outflow of funds to settle such obligations is probable and can be estimated reliably. The values used for such accruals are based on the amounts required to cover the Group’s future payment obligations, foreseeable risks and non-specific obligations. Where required, accruals are stated net of unaccrued interest.

Liabilities are shown at amortized costs.

Impairment.
With the exception of inventories (see inventories), deferred tax assets (see deferred tax assets) as well as financial assets (equity investments, loans, receivables, securities and derivatives), the book values of assets held by the Wincor Nixdorf Group are checked on the balance sheet date to see whether there are indicators favoring impairment. Where such indicators exist, the settlement value of the assets is estimated and devaluation is made with a corresponding charge to the statement of income.

Goodwill is tested for impairment annually or if an indication for impairment exists by the execution of an impairment test according to IAS 36. In doing so, the book value of a business unit is compared with the recoverable amount. The Retail and Banking business carved out of the Siemens Group as of October 1, 1999, is considered as one business unit (cash generating unit); all of the following acquisitions are treated individually as independent business units (cash generating units) according to IFRS 3/IAS 36. The recoverable amount equals the value in use, which is determined by the discounted cash flow method. Basis for the determination of future cash flows are data from the detailed Group planning for the periods until 2008/2009 with subsequent transition to perpetuity. The assumptive continual growth of 1 to 2% for perpetuity complies with the general expectation of the business development. The present value of cash flows is calculated by discounting the free cash flows with an interest rate before taxes between 8 and 12% resembling the referring rate of return of the business units.

If the recoverable amount of a business unit is lower than its book value, a goodwill impairment loss is recorded in the amount of the difference.

Derivates.
Wincor Nixdorf uses derivatives to limit existing interest rate fluctuation risks arising from financing and exchange rate risks of the Group. No derivatives are held for trading purposes. Nevertheless, derivatives not meeting the requirements for cash flow hedge accounting are valued as trading instruments.

Derivative transactions are accounted for at acquisition cost at the settlement date. They are then capitalized at a later date at their attributable market values. Resultant profits or losses flow through to profit for the period in question where the requirements for cash flow hedge accounting are not met. If hedging relationships are effective, the amounts of profit are under consideration of deferred tax effects credited (and losses charged) to equity, with no effect on accounting profit.

Leasing.
Wincor Nixdorf Group offers leasing of banking machines to external customers. According to IAS 17 “Leases”, such leasing arrangements predominantly qualify as operating leases. Arrangements that qualify as finance leases are presented at the present value of future minimum lease payments receivable under trade accounts receivable. In addition, the detail of certain contracts, such as company vehicle leases, result in the reporting of liabilities arising from financing leases. These are shown under financial liabilities and stated at the cash value of the minimum lease payments.

Public Sector Assistance.
Public sector financial assistance is reflected in our accounts in accordance with IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance” only where there is reasonable certainty of the associated conditions being met and the assistance provided. Assistance is reported as income, in effect simultaneously offsetting the expenses for which the assistance was provided. During the year, public sector assistance came to €950k (previous year: €753k) and is reported in the profit and loss statement under functional costs (cost of sales, research and development expenses and selling, general and administration expenses).

Net Sales.
Net sales from the delivery of goods are recognized as soon as the entity has transferred to the customer the significant risks and rewards of ownership of the goods. Within this context, the entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold. The amount of revenue can be measured reliably, and it is probable that the economic benefits associated with the transaction will flow to the enterprise.

Net sales from services are recognized when the service is rendered, insofar as the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the enterprise. In the case of maintenance agreements concluded for a period from one to five years, net sales are recognized on a straight-line basis.

Cost of Sales.
The cost of sales includes costs of the sale of products and services as well as purchase costs of the sale of merchandise. In addition to direct material and production costs, the cost of sales comprises overheads including the pro-rata consumption of fixed assets.

Research & Development Expenses.
Under IAS 38, research and development expenses can only be capitalized when certain precise preconditions are met. Under these rules, capitalization is required wherever the development activity will, with an adequate degree of probability, result in future cash inflows which will cover the relevant development expenses in addition to normal costs. Moreover, certain criteria must also be met cumulatively in terms of the development project or the project or process to be developed.

These preconditions are not met, as the nature and dimension of characterizing research and development risks mean that the functional and commercial risk inherent in the products under development can, as a rule, only be estimated with sufficient reliability when

• development of the relevant products or processes has been completed, and
• post-development sales and marketing activities conducted during the pre-marketing stage (marketing and sale as a trial product) have proven that the products meet the technical and commercial requirements posed by the market.

Taxes.
Taxes on income and profit comprise both ongoing and deferred taxes. Taxes are recorded in the statement of income unless they refer to items directly recorded under shareholders’ equity, in which case the corresponding deferred taxes are also entered under shareholders’ equity without any effect upon profit.

Ongoing taxes are taxes expected to be payable for the year, on the basis of tax rates valid in the year in question, plus any tax corrections for previous years.

Deferred taxes are reported in respect of temporary differences between the values, for tax purposes, of assets and liabilities and their values in the Group financial statements. By departure from this, no deferred taxes are reported in respect of goodwill, amortization of which is non-tax-deductible. In addition, deferred tax assets in respect of the future utilization of tax losses carried forward are shown. Deferred tax assets on temporary differences and tax losses carried forward are recognized to the extent that it is probable that sufficient taxable income will be available in order to use them. The deferred taxes are shown at the rates of tax that will be effective under applicable law at the time at which the temporary differences are predicted to turn around or at which the tax losses carried forward can probably be used.