Accounting policies

Basis of presentation

Software AG’s condensed and unaudited consolidated financial statements (quarterly financial statements) as of September 30, 2008 have been prepared in accordance with the International Financial Reporting Standards (IFRS) applicable on the balance sheet date, as endorsed by the EU. The IASs/IFRSs applicable as of September 30, 2008 were observed, as were the corresponding interpretations of the International Financial Reporting Interpretations Committee (IFRIC – formerly SIC). The same accounting policies have been applied as in the consolidated financial statements as of December 31, 2007. Accordingly, accounting policies are not explained in detail in these interim financial statements. These interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting.

Software AG is a joint stock corporation under German law with registered offices in Darmstadt. The Company is the parent company of a Group which is active in the fields of development, licensing, and maintenance of software as well as IT services.

The consolidated financial statements of Software AG are expressed in thousands of euros unless stated otherwise.

Changes in the consolidated group

The group of consolidated companies changed in comparison with December 31, 2007 as a result of the following transactions.

1. Mergers within the Group effective as of January 1, 2008:

  • Software AG, Ltd., Tokyo/Japan was merged into webMethods Japan Kabushiki Kaisha (webMethods Co., Ltd.), Tokyo/Japan
  • webMethods B.V., Amsterdam/Netherlands was merged into Software AG Nederland B.V., Nieuwegein/Netherlands
  • webMethods France Sarl, Paris/France was merged into Software AG France S.A.S., Gentilly/France

2. In addition, on June 5, 2008, Software AG Argentina S.R.L. was established in Buenos Aires, Argentina, with a share capital of €100 thousand.

Earnings per share

Earnings per share were calculated by dividing net income for the period attributable to Software AG’s shareholders by the weighted average number of shares issued and outstanding during the period under review. Software AG has issued only common shares. The weighted average number of shares amounted to 28,587,447 in the first three quarters of 2008. The weighted average number of shares amounted to 28,615,731 in the third quarter 2008.

A total of 89,180 stock options were exercised in the first three quarters of 2008, of which 25,808 were exercised in the third quarter. The number of shares increased correspondingly by 89,180 in the first three quarters of 2008. Another 34,510 stock options may be exercised from the second stock option plan in fiscal 2008. Therefore, diluted earnings per share were calculated for these potential shares in the quarterly financial statements using the treasury stock method. Diluted earnings per share were computed by dividing net income for the period attributable to Software AG’s shareholders by the weighted average number of shares issued and outstanding plus the weighted average number of exercisable stock options.