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Business at SAP
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SAP AG financial statements reflect revenue growth
As in previous years, SAP is filing not only consolidated financial
statements for the SAP Group but also separate annual
financial statements for its parent company, SAP AG. Whereas
the consolidated financial statements are prepared in accordance
with U.S. generally accepted accounting principles
(U.S. GAAP), SAP AG standalone financial statements are
required to be filed in accordance with the accounting principles
defined in the German Commercial Code or Handelsgesetzbuch(HGB).
As in the past, the major source of the revenue reported
in the SAP AG statements was software license fees paid by subsidiaries.
Thus SAP AG’s 12 % revenue increase to €3,317 million
in 2004 primarily results from the increase in product revenue
posted by the SAP Group. Another factor was a change in the
recording of third-party database management system license
fees, which SAP AG collects and pays and which increased the
revenue figure and the other operating expense figure by
equal amounts. SAP AG’s cost of services and materials almost
entirely comprises third-party services, including those
provided by SAP subsidiaries. This figure rose 24 %. Personnel
expenses, mainly the labor cost of the developers, service and
support staff, and administration staff employed by SAP AG,
were 2% lower than in the previous year at €749 million despite
the headcount growth. The major factor in the decrease
was a lower expense for stock-based compensation than in
2003. Depreciation and amortization expenses rose 1% to
€335 million.
In 2003, a transfer, within the SAP Group, of shares of
an SAP subsidiary company resulted in income from liquidation
and realization of hidden reserves totaling €315 million in
the SAP AG financial statements. No such structural measures
were undertaken in 2004, and the figure for other operating
expenses was consequently 55 % lower in 2004 at €307 million.
This was the main reason why operating income declined 30%
to €703 million in 2004.
Higher interest income earned on liquid assets in 2004
and lower writedowns on financial assets combined to increase
SAP AG’s finance income 37 % to €490 million. Since that
increase did not fully compensate the decline in operating
income, pretax income at €1,193 million was 12 % less than in
2003. SAP AG’s effective tax rate for 2004 was 36 %. The 2003
effective tax rate was considerably lower at 22 %, mainly
because of nontaxable income from the intra-group transfers
of shares of an SAP subsidiary and from equity securities.
Owing to the higher effective tax rate, the 28 % decline in net
income to €758 million was more pronounced than the decline
in pretax income in 2004.
SAP AG’s total assets closed at €5,770 million in 2004.
The major factors in the 22 % increase on the 2003 figure were
liquid assets and marketable securities. Shareholders’ equity
grew 17 % to €3,692 million, chiefly as a result of the retained
earnings carryforward from the previous year. The equity ratio
was 64 %.
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