Philips 2006 Annual Report Download - page 216

Philips Annual Report 2006216
December 31, 2005 December 31, 2006
carrying
amount
estimated
fair value
carrying
amount
estimated
fair value
Assets
Cash and cash equivalents 5,293 5,293 6,023 6,023
Accounts receivable - current 4,638 4,638 4,773 4,773
Other non-current fi nancial
assets excluding cost-
method investments 673 673 7,013 7,013
Accounts receivable -
non-current 213 212 206 205
Main listed investments in
equity-accounted investees 4,911 11,139 2,627 2,803
Derivative instruments -
assets 143 143 298 298
Trading securities − − 192 192
Liabilities
Accounts payable (3,457 ) (3,457 ) (3,450 ) (3,450 )
Debt (4,507 ) (4,777 ) (3,878 ) (4,018 )
Derivative instruments -
liabilities (193 ) (193 ) (101 ) (101 )
The following methods and assumptions were used to estimate
the fair value of fi nancial instruments:
Cash, accounts receivable - current and accounts payable
The carrying amounts approximate fair value because of the short
maturity of these instruments.
Cash equivalents
The fair value is based on the estimated market value.
Other fi nancial assets
For other fi nancial assets, fair value is based upon the estimated
market prices.
Accounts receivable – non-current
The fair value is estimated on the basis of discounted cash fl ow analyses.
Debt
The fair value is estimated on the basis of the quoted market prices
for certain issues, or on the basis of discounted cash fl ow analyses
based upon market rates plus Philips’ spread for the particular tenors
of the borrowing arrangements. Accrued interest is included under
accounts payable and not within the carrying amount or estimated
fair value of debt. At December 31, 2006 the accrued interest of
bonds, which is the main part of the accrual, was EUR 100 million
(2005: EUR 106 million).
60
Subsequent events
P hilips Mobile Phones
On February 12, 2007, Philips and China Electronics Corporation
(CEC) signed an agreement to transfer Phlips’ remaining Mobile Phone
activities tot CEC. CEC will take over the responsibility for Philips’
Mobile Phones business, which had sales of approximately EUR 320
million in 2006 and has approximately 240 employees, mainly in Asia
Pacifi c and Eastern Europe. This transaction is conditional on all required
shareholder, government and regulatory approvals, and is expected to
be closed by the end of the fi rst quarter 2007. The transaction is
estimated to result in a cash infl ow of approximately EUR 25 million.
The transaction involves the transfer of the “Xenium” brand, which is
associated with long-battery life, to CEC under the terms of the
agreement. CEC will receive an exclusive license to market and sell
mobile phones under the Philips brand for the coming years. Certain
mobile phone-related patents will be transferred and licensed to CEC.
In addition, Philips will transfer tot CEC its excisting marketing network
in some key countries for the mobile phone business, as well as its 25%
equity stake in Shenzhen Sangfei Consumer Communications Co. Ltd.
Partners in Lighting
On February 5, 2007, Philips acquired Partners in Lighting (PLI),
a leading European manufacturer of home luminaires. PLI markets
its products under brand names such as Massive, Modular and Lirio.
The total cost of the acquisition, paid in cash, was EUR 584 million.
PLI develops, manufactures and markets a wide portfolio of more
than 10,000 distinct home lighting luminaire products currently mainly
for the European market. PLI’s revenue for 2006 is approximately
EUR 406 million.
The condensed balance sheet of PLI determined in accordance
with IFRS, immediately before and after acquisition date:
before
acquisition date
after
acquisition date
Assets
Goodwill 293
1) 293
Other intangible assets − 214
Property, plant and equipment 76 81
Other non-current fi nancial assets 10 8
Working capital 75 101
Net cash 13 13
Deferred tax assets/liabilities 8 (73 )
Other non-current
fi nancial liabilities (30 ) (6 )
445 631
Financed by
Group equity (46 ) 584
Loans 491 47
445 631
1) the goodwill amount in the “before acquisition date” column is based on
Belgian GAAP and has not been converted to IFRS for reasons of
impracticability as the majority of this balance relates to acquisitions which
took place a number of years ago. The Belgian GAAP amount was eliminated
as a result of the provisional purchase price allocation. Therefore the goodwill
as refl ected in the “after acquisition date” column does refl ect the goodwill
in accordance with IFRS even though both amounts are equal.
Other intangible assets comprise:
amount
amortization
period in years
Customer relationships 153 20
Trademarks and trade names 61 20
214
Share repurchase
On January 22, 2007 Philips initiated a EUR 1,633 million share
repurchase program for capital reduction purposes to complete the
planned return of a total of EUR 4 billion to its shareholders. It is
expected that the program will be completed before the end of 2007.
112 Group fi nancial statements 172 IFRS information
Auditors’ report
218 Company fi nancial statements