Philips 2007 Annual Report Download - page 221

Philips Annual Report 2007 227
Balance as of January 1, 2007:
−
Change in book value:
Capital expenditures − −
− −
− − − −
−
−
Balance as of December 31, 2007:
−
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Intangible assets excluding goodwill
The changes during 2007 were as follows:
other
intangible
assets
product
development software total
Balance as of
January 1, 2007:
Cost 2,447 1,083 552 4,082
Accumulated
amortization (590) (548) (386) (1,524)
Book value 1,857 535 166 2,558
Changes in
book value:
Additions − 232 118 350
Acquisitions 704 1 7 712
Amortization/
deductions (200) (231) (76) (507)
Impairment
losses − (14) − (14)
Translation
differences (220) (16) (11) (247)
Other (36) 12 7 (17)
Total changes 248 (16) 45 277
Balance as of
December 31,
2007:
Cost 2,848 1,146 615 4,609
Accumulated
amortization (743) (627) (404) (1,774)
Book Value 2,105 519 211 2,835
Other intangible assets in 2007 consist of:
January 1 December 31
gross
accumulated
amortization gross
accumulated
amortization
Marketing-
related1) 314 (48) 179 (31)
Customer-
related 969 (190) 1,124 (195)
Contract-
based 54 (9) 33 (10)
Technology-
based 724 (266) 861 (417)
Patents and
trademarks1)
386 (77) 651 (90)
2,447 (590) 2,848 (743)
1) In 2007, a reclassication was made of EUR 100 million following nalization of
the purchase price accounting of Lifeline.
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The estimated amortization expense for these other intangible
assets for each of the ve succeeding years are:
2008 207
2009 206
2010 202
2011 175
2012 153
The expected weighted average remaining life of other intangible
assets is 6.1 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 350 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, 2005: EUR 13 million).
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Goodwill
The changes in 2006 and 2007 were as follows:
2006 2007
Balance as of January 1:
Cost 2,530 3,822
Accumulated amortization/impairments (459) (416)
Bookvalue 2,071 3,406
Changes in book value:
Acquisitions 1,596 760
Translation differences (261) (366)
Balance as of December 31:
Cost 3,822 4,173
Accumulated amortization/impairments (416) (373)
Bookvalue 3,406 3,800
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
cash-generating unit (one level below sector level) and range from
8.0% to 11.3%, with an average of 9.7% for the Philips 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 goodwill related to the acquisitions
of Partners in Lighting for EUR 297 million and Color Kinetics for
EUR 358 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 goodwill related to the acquisitions of
Lifeline for EUR 341 million, Witt Biomedical for EUR 83 million,
Avent for EUR 344 million and Intermagnetics for EUR 730 million,
and several smaller acquisitions.
Please refer to page 203 of this Annual Report for a specication
of goodwill by sector.
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Group nancial statements
Notes to the IFRS 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