3. Summary of Significant Accounting Policies

Use of Estimates
The preparation of the Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. In making its estimates, the Company considers historical and forecast information, as well as regional and industry economic conditions in which the Company and/or its customers participate, changes to which could negatively impact the estimates made by management, in particular when assessing the valuation and recoverability of receivables, investments and other assets, and tax positions. Actual results could differ from SAP’s estimates.

SAP’s financial position, results of operations, and cash flows are subject to numerous risks and uncertainties. Factors that could affect the Company’s future financial statements and cause actual results to differ materially from current expectations include, but are not limited to, further adverse changes in the global economy, consolidation and intense competition in the software industry, decline in customer demand in the most important markets in Europe, the United States and Asia as well as fluctuations in currency exchange rates.

Foreign Currencies
The assets and liabilities of foreign operations where the functional currency is not the euro are generally translated into euro using period-end closing exchange rates whereas the Statements of Income are translated into euros using average exchange rates during the respective periods. The resulting foreign currency translation adjustments are included in other comprehensive income in the Consolidated Statements of Changes in Shareholders’ Equity.

Assets and liabilities that are denominated in foreign currencies other than the functional currency are translated at the period-end closing rate with resulting gains and losses reflected in Other non-operating income/expense, net in the Consolidated Statements of Income.

The exchange rates of key currencies affecting the Group are as follows: