Philips 2007 Annual Report Download - page 123

Philips Annual Report 2007 129
Report of independent registered public
accounting rm
To the Supervisory Board and Shareholders of Koninklijke Philips
Electronics N.V.:
We have audited the accompanying consolidated balance sheets of
Koninklijke Philips Electronics N.V. and subsidiaries as of December 31,
2007 and 2006, and the related consolidated statements of income,
stockholders’ equity and cash ows for each of the years in the three-
year period ended December 31, 2007, appearing on page 130 to 186.
We also have audited Koninklijke Philips Electronics N.V. and
subsidiaries’ internal control over nancial reporting as of December
31, 2007, based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). Koninklijke Philips Electronics N.V.
and subsidiaries’ management is responsible for these consolidated
nancial statements, for maintaining effective internal control over
nancial reporting, and for its assessment of the effectiveness of
internal control over nancial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting
appearing on page 128. Our responsibility is to express an opinion
on these consolidated nancial statements and an opinion on the
company’s internal control over nancial reporting based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the nancial statements are free
of material misstatement and whether effective internal control over
nancial reporting was maintained in all material respects. Our audits
of the consolidated nancial statements included examining, on a test
basis, evidence supporting the amounts and disclosures in the nancial
statements, assessing the accounting principles used and signicant
estimates made by management, and evaluating the overall nancial
statement presentation. Our audit of internal control over nancial
reporting included obtaining an understanding of internal control over
nancial reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis
for our opinions.
A company’s internal control over nancial reporting is a process
designed to provide reasonable assurance regarding the reliability
of nancial reporting and the preparation of nancial statements for
external purposes in accordance with generally accepted accounting
principles. A company’s internal control over nancial reporting
includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly
reect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of nancial statements in accordance
with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3)
provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets
that could have a material effect on the nancial statements.
Because of its inherent limitations, internal control over nancial
reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Koninklijke Philips Electronics N.V. and subsidiaries acquired Health
Watch, Raytel Cardiac Services, VMI Sistemas Medicos, XIMIS, Emergin,
Color Kinetics, TIR Systems, Partners in Lighting International, Lighting
Technologies International and Digital Lifestyle Outtters (together
“the Acquired Companies”) during 2007. Management excluded from
its assessment of the effectiveness of Koninklijke Philips Electronics
N.V. and subsidiaries’ internal control over nancial reporting as
of December 31, 2007, the Acquired Companies’ internal control
over nancial reporting of which total assets represented 4.3% of
consolidated total assets and net sales represented less than 2%
of consolidated net sales included in the consolidated nancial
statements of Koninklijke Philips Electronics N.V. and subsidiaries as
of and for the year ended December 31, 2007. Our audit of internal
control over nancial reporting of Koninklijke Philips Electronics N.V.
and subsidiaries also excluded an evaluation of the internal control
over nancial reporting of the Acquired Companies.
In our opinion, the consolidated nancial statements referred to above
present fairly, in all material respects, the nancial position of Koninklijke
Philips Electronics N.V. and subsidiaries as of December 31, 2007 and
2006, and the results of their operations and their cash ows for each
of the years in the three-year period ended December 31, 2007, in
conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, Koninklijke Philips Electronics
N.V. and subsidiaries maintained, in all material respects, effective
internal control over nancial reporting as of December 31, 2007,
based on criteria established in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
As discussed in note 20 to the consolidated nancial statements,
effective December 31, 2006, Koninklijke Philips Electronics N.V.
and subsidiaries adopted the provisions of SFAS No. 158, ‘Employers’
Accounting for Dened Benet Pension and Other Postretirement Plans’.
KPMG Accountants N.V.
Amstelveen, February 18, 2008
Group nancial statements Company nancial statements 250 Corporate governance246 Reconciliation of
non-US GAAP information 258 The Philips Group in the last ten years 260
Investor information