Philips 2007 Annual Report Download - page 156

Philips Annual Report 2007162
16
Intangible assets excluding goodwill
The changes during 2007 were as follows:
software
other
intangible
assets total
Balance as of
January 1, 2007:
Cost 552 2,199 2,751
Accumulated
amortization (386) (552) (938)
Book value 166 1,647 1,813
Changes in book value:
Acquisitions/additions 125 704 829
Amortization/deductions (76) (200) (276)
Translation differences (11) (200) (211)
Other 7 (8) (1)
Total changes 45 296 341
Balance as of
December 31, 2007:
Cost 615 2,629 3,244
Accumulated
amortization (404) (686) (1,090)
Book value 211 1,943 2,154
Other intangible assets in 2007 consist of:
January 1 December 31
gross
accumulated
amortization gross
accumulated
amortization
Marketing-1)
related 301 (47) 168 (30)
Customer-
related 874 (180) 1,042 (182)
Contract-
based 54 (9) 33 (10)
Technology-
based 584 (239) 735 (374)
Patents and
trademarks1) 386 (77) 651 (90)
2,199 (552) 2,629 (686)
1) In 2007, a reclassication was made of EUR 100 million following nalization of
the purchase price accounts of Lifeline.
The estimated amortization expense for these other intangible assets
for each of the ve succeeding years is:
2008 181
2009 180
2010 176
2011 149
2012 127
The expected weighted average remaining life of other intangibles
is 6.4 years as of December 31, 2007.
The additions acquired through business combinations in 2007 consist
of the acquired intangible assets of Partners in Lighting of EUR 217
million and Color Kinetics of EUR 187 million.
Other intangible assets include EUR 356 million representing the
trademarks and trade names Lifeline and Avent, which were acquired
in 2006 and have indenite useful lives. These brands are used together
with the Philips brand in a dual branding strategy. Therefore 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 63 million (2006: EUR 57 million).
The amounts charged to the income statement for amortization
or
impairment of these capitalized computer software costs amounted
to EUR 20 million (2006: EUR 18 million).
17
Goodwill
The changes in 2006 and 2007 were as follows:
2006 2007
Balance as of January 1:
Cost 2,570 3,853
Accumulated amortization/impairments (142) (130)
Book value 2,428 3,723
Acquisitions 1,590 810
Translation differences (295) (398)
Balance as of December 31:
Cost 3,853 4,249
Accumulated amortization/impairments (130) (114)
Book value 3,723 4,135
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 ows. The discount rates are determined for each
reporting unit (one level below sector level) and range from 8.0% to
11.3%, with an average of 9.7% for the Group. Sales and gross margin
growth are based on management’s internal forecasts for four years
that are extrapolated for another ve years with reduced growth
rates, after which a terminal value is calculated in which growth rates
are reduced to a level of 0% to 3.5%.
Acquisitions in 2007 include the goodwill paid on the acquisition
of Partners in Lighting for EUR 297 million, Color Kinetics for EUR 357
million and several smaller acquisitions. In addition goodwill changed
due
to the nalization of purchase price accounting related to acquisitions
in
prior years.
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 733 million (adjusted
for the effects of the nal purchase price allocation completed in 2007),
and several smaller acquisitions.
Please refer to Information by sectors and main countries that begins
on page 138 of this Annual Report for a specication of goodwill
by sector.
128 Group nancial statements
Notes to the group nancial statements
188 IFRS information 240 Company nancial statements