Philips 2007 Annual Report Download - page 139

Philips Annual Report 2007 145
FIN 46 (R) – 6 ‘Determining the Variability to be Considered in
Applying FASB Interpretation No. 46(R)’
This FASB interpretation was issued on April 13, 2006 and addresses
how a company should determine the variability to be considered
for variable interest entities. Adoption of this FSP did not change
the conclusions of assessments of variable interest entities in
previous periods.
FIN 48 ‘Accounting for Uncertainty in Income Taxes’
The Company adopted FASB Interpretation No. 48, ‘Accounting for
Uncertainty in Income Taxes – an interpretation of FASB Statement
No. 109’, which claries the accounting for uncertainty in income
taxes recognized in the nancial statements in accordance with SFAS
No. 109, ‘Accounting for Income Taxes’. This interpretation provides
a recognition threshold and measurement attribute for the nancial
statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. Under FIN 48, the Company
may recognize the tax benet from an uncertain tax position only
if it is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits
of the position. The tax benets recognized in the nancial statements
from such position should be measured based on the largest benet
that is more than 50% likely to be realized upon settlement with
a taxing authority. FIN 48 also provides guidance on derecognition,
classication, interest and penalties, accounting in interim periods,
disclosure, and transition. The Company adopted the provisions
of FIN 48 as of January 1, 2007 and this did not result in an adjustment
to existing liabilities nor the opening balance of retained earnings.
Accounting standards effective as from 2008
FASB issued several pronouncements with an effective date
on or after January 1, 2008, of which the following are applicable
to the Company:
SFAS No. 157 ‘Fair Value Measurements’
In September 2006, the FASB issued SFAS No. 157 ‘Fair Value
Measurements.’ This standard establishes a single denition of fair
value and a framework for measuring fair value, sets out a fair value
hierarchy to be used to classify the source of information used in fair
value measurements, and requires new disclosures of assets and
liabilities measured at fair value based on their level in the hierarchy.
SFAS No. 157 is effective for all scal years beginning after November
15, 2007 (January 1, 2008 for Philips) and is to be applied prospectively.
The Company is currently evaluating the impacts and disclosures of
this standard.
SFAS No. 159 – The Fair Value Option for Financial Assets
and Financial Liabilities’
In February 2007, the FASB issued SFAS No. 159, ‘The Fair Value Option
for Financial Assets and Financial Liabilities.’ SFAS No. 159 permits
an entity to choose, at specied election dates, to measure eligible
nancial instruments and certain other items at fair value that are not
currently required to be measured at fair value. An entity shall report
unrealized gains and losses on items for which the fair value option
has been elected in earnings at each subsequent reporting date.
Upfront costs and fees related to items for which the fair value is
elected shall be recognized in the income statements as incurred
and not deferred. SFAS No. 159 also established presentation and
disclosure requirements designed to facilitate comparisons between
entities that choose different measurement attributes for similar
types of assets and liabilities. SFAS No. 159 is effective for scal years
beginning after November 15, 2007 (January 1, 2008 for Philips). The
Company has evaluated this Standard and at present does not plan
to avail itself of this option.
Group nancial statements
Signicant accounting policies
Company nancial statements 250 Corporate governance246 Reconciliation of
non-US GAAP information 258 The Philips Group in the last ten years 260
Investor information