The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the amount of assets and liabilities and disclosures on contingent assets and liabilities at the balance sheet date and the amount of income and expenses during the reporting period. Actual amounts may differ from these estimates. The estimates and assumptions are based on experience and other factors considered relevant in measuring carrying amounts where these are not readily apparent from other sources. Demag Cranes AG reviews the estimates and underlying assumptions on an ongoing basis. Revisions to accounting estimates are recognised in the period in which an estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

In the preparation of the Consolidated Financial Statements, the Management Board of Demag Cranes AG used estimates and assumptions relating to material items as follows:

• Assessment of the Need to Recognise Impairments and Measurement of the Amount of Any Impairment Loss
  Demag Cranes AG assesses at each reporting date whether there is any indication that assets are impaired. To test for impairment, an asset’s or cash-generating unit’s recoverable amount is compared with its carrying amount. The recoverable amount is fair value less costs to sell or value in use, whichever is higher. Demag Cranes normally measures the recoverable amount on the basis of fair value less costs to sell. In estimating fair value less costs to sell, management makes assumptions regarding expected future cash flows from each asset or cash-generating unit, using appropriate discount rates. The recoverable amount of trademarks in other intangible assets is determined using the relief from royalty method. Impairment testing has confirmed the carrying amounts of goodwill and trademarks.
• Estimated Useful Lives
  Useful lives are based on estimates. The estimated useful lives of intangible assets, property, plant and equipment and investment property are reviewed at each year-end. As in the previous year, the review has not identified any need to alter the estimated useful life of any asset.
• Recognition and Measurement of Development Expenses
  Development expenses are capitalised if the recognition criteria in IAS 38 are satisfied. Initial recognition is based on management estimates. For this purpose, management makes assumptions concerning the size of expected future cash flows, the applicable discount rates and the period over which expected future benefits will be generated. Development expenses are amortised over the expected useful life of the asset from the point at which it is able to be used. EUR 1,983,000 in development expenses were capitalised in financial year 2009/2010 (2008/2009: EUR 643,000). Impairment testing of capitalised development expenses did not result in recognition of any impairment losses in financial year 2009/2010 (2008/2009: EUR 5,967,000). Further information on the impairment of capitalised development expenses is provided in Note 14.
• Accounting for Pensions and Similar Obligations
  Demag Cranes AG uses actuarial valuations in the measurement of pensions and similar obligations. These valuations are made on the basis, among other things, of expected returns on plan assets, future salary increases, future pension increases and mortality. Due to their long-term focus, these estimates are subject to material uncertainty. The provision for pensions and similar obligations amounted to EUR 157,376,000 (2009: EUR 132,530,000) at the balance sheet date. Further information is provided in Note 24.
• Accounting for Restructuring Provisions
  The size of the restructuring provision is based on management’s best estimate. Changes in estimates may become necessary as the restructuring plan takes on substance and is implemented. The restructuring provision came to EUR 8,692,000 at 30 September 2010 (2009: EUR 33,471,000). Further information is provided in Note 25.
• Other Personnel-Related Obligations and Partial Retirement Obligations
  Recognition and measurement of partial-retirement obligations and other personnel-related obligations likewise involve estimates and assumptions regarding the expected timing and amount. Factors include biometric data used in calculations, workforce turnover and take-up of partial retirement arrangements. Other personnel-related obligations totalled EUR 46,375,000 at the balance sheet date (2009: EUR 35,844,000) plus EUR 13,503,000 (2009: EUR 15,495,000) relating to partial retirement. Further information is provided in Note 28.
• Share-Based Payment
  In determining the fair value of equity instruments, Demag Cranes AG applies a suitable valuation technique (Monte Carlo simulation) that reflects the conditions of its share-based payment scheme. The variables incorporated in the valuation model and the fair values of equity instruments are presented in Note 23.
• Deferred Tax Assets
  Deferred tax assets are recognised for tax loss carryforwards to the extent that it is probable that there will be taxable profits permitting their utilisation. Their measurement requires estimates as to the timing and amount of taxable profits against which they can be utilised. At 30 September 2010, the net carrying amount of deferred tax assets recognised for tax loss carryforwards amounted to EUR 15,960,000 (2009: EUR 15,248,000). Further information is provided in Note 29.

All estimates and assumptions are based on the best available information and the objective of achieving a fair presentation of the financial position, financial performance and cash flows of Demag Cranes AG. Due to the uncertainty associated with estimates and assumptions, actual results may differ from the reported amounts.