Philips 2006 Annual Report Download - page 146

Philips Annual Report 2006146
16
Intangible assets excluding goodwill
The changes during 2006 were as follows:
software
other
intangible
assets
intangible
pension
assets total
Balance as of
January 1, 2006
Cost 516 1,569 86 2,171
Accumulated
amortization (378 ) (553 ) − (931 )
Book value 138 1,016 86 1,240
Changes in book
value:
Acquisitions/
additions 109 1,013 − 1,122
Amortization/
deductions (73 ) (166 ) − (239 )
Translation
differences (8 ) (112 ) (1 ) (121 )
Changes in
consolidation − (2 ) − (2 )
Other − − (85 ) (85 )
Total changes 28 733 (86 ) 675
Balance as of
December 31, 2006
Cost 554 2,368 − 2,922
Accumulated
amortization (388 ) (619 ) − (1,007 )
Book value 166 1,749 − 1,915
Other intangible assets in 2006 consist of:
January 1 December 31
gross
accumulated
amortization gross
accumulated
amortization
Marketing-
related 62 (43 ) 303 (49 )
Customer-
related 646 (144 ) 1,048 (252 )
Contract-
based 46 (11 ) 47 (2 )
Technology-
based 658 (251 ) 584 (239 )
Patents and
trademarks 157 (104 ) 386 (77 )
1,569 (553 ) 2,368 (619 )
The estimated amortization expense for these other intangible assets
for each of the fi ve succeeding years are:
2007 193
2008 183
2009 173
2010 162
2011 141
The expected weighted average remaining life of other intangibles is
7 years as of December 31, 2006.
Additions to other intangible assets include the acquired trademark
and trade names Lifeline and Avent, that are valued on a preliminary
basis at EUR 114 million and EUR 242 million respectively. The
Company decided to use these brands together with the Philips
brand in a dual branding marketing strategy. This decision, together
with market evidence, indicates that these brands have indefi nite
useful lives. This implies that these brands are not amortized but
tested for impairment annually or whenever there is an indication
that the brand may be impaired.
The unamortized costs of computer software to be sold, leased or
otherwise marketed amounted to EUR 57 million at the end of 2006
(2005: EUR 50 million). The amounts charged to the income statement
for amortization or impairment of these capitalized computer software
costs amounted to EUR 18 million in 2006 (2005: EUR 13 million).
17
Goodwill
The changes during 2006 were as follows:
2005 2006
Balance as of January 1 1,640 2,535
Changes in book value:
Acquisitions 675 1,590
Divestments (34 ) −
Reclassifi cation from equity-accounted investees 13 −
Translation differences 241 (305 )
Balance as of December 31 2,535 3,820
The key assumptions used in the annual impairment test are growth
of sales and gross margin, together with the rates used for discounting
the forecast cash fl ows. The discount rates are determined for each
reporting unit (one level below sector level) and range from 7.5% to
14.1%, with an average of 10.3% for the Philips Group. Sales and gross
margin growth are based on management’s internal forecasts for four
years that are extrapolated for another fi ve years with reduced growth
rates, after which a terminal value is calculated in which growth rates
are reduced to a level of 1% to 4%.
Acquisitions in 2006 include the goodwill paid on the acquisition of
Lifeline for EUR 341 million, Witt Biomedical for EUR 90 million,
Avent for EUR 344 million and Intermagnetics for EUR 773 million,
and several smaller acquisitions.
Acquisitions in 2005 include the goodwill paid on the acquisition of
Stentor for EUR 115 million and Lumileds for EUR 554 million, both in
the US, and several smaller acquisitions.
Please refer to the previous section Information by sectors and main
countries of the chapter Group fi nancial statements of this Annual
Report for a specifi cation of goodwill by sector.
112 Group fi nancial statements
Notes to the group fi nancial statements
172 IFRS information 218 Company fi nancial statements