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Accounting Policies

 
 
 

Basis of presentation
Software AG’s consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as promulgated by the International Accounting Standards Board (IASB). The IAS/IFRSs applicable as of December 31, 2005 were observed, as were the corresponding interpretations of the International Financial Reporting Interpretations Committee (IFRIC – formerly SIC). The same accounting policies have been applied in these interim financial statements as in the 2005 financial statements. Therefore, the accounting policies are not explained in detail in these quarterly financial statements. These quarterly financial statements have been prepared in accordance with IAS 34, Interim Financial Statements.

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

Changes in the consolidated group
In the first half of 2006, the number of consolidated companies was increased from the level as of December 31, 2005 due to the formation of the following companies:

Software AG Chile S. A., Chile, was founded on the 1st February, 2006. This company was equipped with a share capital of €8 thousand (CLP 5 million). The share capital is divided into 999 shares held by Software AG Latinoamérica, S.L., Spain and 1 share held by Software AG, Spain.

As of June 30, 2006, Software AG Development Center Bulgaria EOOD, Bulgaria, was established with a share capital of €3 thousand. The company’s shares are wholly owned by its parent company, Software AG.

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 outstanding during the reporting period and have been presented accordingly. Software AG has only issued common shares. In the second quarter of 2006, the weighted average number of shares amounted to 28,075,987. In the first half of 2006, the weighted average number of shares was 28,056,811.
All three criteria for exercising options as set out in the first stock option plan for members of the Executive Board, officers and other employees were also met in the second quarter of 2006. A total of 73,456 of the outstanding options under this stock option plan were exercised during the second quarter. The remaining 7,001 options under this plan may be exercised until 2008, provided the share price is at least €30 at the time the options are exercised. The diluted earnings per share were calculated for these potential shares using the treasury stock method and presented for the reporting period. Diluted earnings per share were calculated by dividing net income for the period attributable to Software AG’s shareholders by the number of shares in issue and the exercisable stock options.

 
 
 
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  Interim Report Q2/06 (PDF)
  
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