Equity Securities at Cost
The carrying value of all equity securities at cost was €69 million and €58 million as at December 31, 2007, and 2006, respectively. Equity securities at cost, which primarily include venture capital investments, are not included in the table above, because market values for those securities are generally not readily obtainable. In 2007, we sold two (2006: two; 2005: three) investments with a carrying value at the time of sale of €3 million (2006: €2 million; 2005: €1 million) and realized a gain of €0 million (2006: €0 million; 2005: €1 million). As at December 31, 2007 we intend to dispose of two equity securities at cost.
During 2007, 2006, and 2005, the Company recorded €6 million, €1 million, and €4 million, respectively, in charges related to other-than-temporary impairments of equity securities at cost.
Equity Method Investments
The excess of our initial investment in equity method companies over our ownership percentage in the underlying net assets of those companies amounts to €11 million as at December 31, 2007 (2006: €15 million) and is attributed to certain fair value adjustments with the remaining portion recognized as goodwill. Although we own less than 20% of the voting stock of the investee company, we account for our investments in (“Procurement Negócios Electronicos S/A”, Rio de Janeiro, Brazil and “ArisGlobal Holdings, LLC”, Stamford, Connecticut, USA) using the equity method, because we can exercise significant influence over the operating and financial policies of these entities through holding seats on their boards.
We recorded no impairment losses or reversals thereof on equity method investments during 2007, 2006 and 2005. Therefore, no allocation to our reportable segments was necessary.
Our equity method investment Procurement Negócios Electronicos S/A, with a carrying amount of €2 million has been pledged in 2007 in order to serve as a guarantee for an ongoing lawsuit with the Brazilian tax authorities. In case of an unfavourable outcome of the lawsuit for SAP, for which probability is considered remote, the Brazilian tax authorities are allowed to make use of the collateral.
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