Philips 2004 Annual Report Download - page 114
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Depreciation and amortization
Depreciation of property, plant and equipment and amortization of intangibles are as follows:
2002 2003 2004
Depreciation of property, plant and equipment 1,814 1,552 1,402
Amortization of internal use software 174 164 145
Amortization of goodwill and other intangibles:
- Amortization of other intangible assets 165 151 150
- Impairment of goodwill 19 148 596
Write-off of in-process R&D 12 ––
2,184 2,015 2,293
Depreciation of property, plant and equipment includes an additional write-off in connection
with the retirement of property, plant and equipment amounting to EUR 29 million in 2004
(2003: EUR 33 million, 2002: EUR 32 million).
Included in depreciation of property, plant and equipment is an amount of EUR 125 million
(2003: EUR 254 million, 2002: EUR 214 million) that is reported under restructuring and
impairment charges.
Depreciation of property, plant and equipment and amortization of software are primarily
included in cost of sales.
Goodwill is no longer amortized but is tested for impairment as Philips applies SFAS No. 142 (as
from January 1, 2002).
Goodwill impairments recorded in 2004 amounted to EUR 596 million (2003: EUR 148 million).
Of this amount, EUR 590 million related to MedQuist.
Rent
Rent expenses amounted to EUR 407 million in 2004 (2003: EUR 455 million, 2002: EUR 451
million).
Selling expenses
Advertising and sales promotion costs incurred during 2004 totaled EUR 899 million (2003:
EUR 878 million, 2002: EUR 952 million) and are included in selling expenses. Moreover,
shipping and handling costs of EUR 466 million are also included (2003: EUR 515 million, 2002:
EUR 605 million).
General and administrative expenses
General and administrative expenses include the costs related to management and staff
departments in the corporate center, product divisions and country/regional organizations,
amounting to EUR 1,181 million in 2004 (2003: EUR 1,238 million, 2002: EUR 1,406 million).
Additionally, the pension costs and costs of other postretirement benefit plans relating to
inactive employees, and as such not attributable to product divisions, amounted to a net cost of
EUR 151 million in 2004 (2003: cost of EUR 254 million, 2002: benefit of EUR 2 million).
113Philips Annual Report 2004