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
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 February 1, 2006. This company was endowed
with 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 February 23, 2006, Software AG, Ltd. Japan was established with a share capital of
€72 thousand (JPY 10 million). The company’s shares are wholly owned by its parent company,
Software AG, Inc., USA.
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 third quarter of 2006, the weighted average number of shares amounted to
28,112,715. In the first three quarters of 2006, the weighted average number of shares was
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 third quarter of 2006.
None of the outstanding options under this stock option plan were exercised during the third
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.