Philips 2007 Annual Report Download - page 231

Philips Annual Report 2007 237
exercised. As a means to protect the Company and its stakeholders
upon exercise of options and convertible personnel debentures and
treasury shares are issued, is recorded in capital in excess of par value,
except in the situation in which the cash received is lower than cost
and capital in excess of par has been depleted.
took place:
place in 2007:
EUR 3,940 million is expected to be added to retained earnings.
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Limitations distribution of stockholders’ equity
Pursuant to Dutch law certain limitations exist relating to the
distribution of stockholders’ equity. As a further explanation it should
be noted that, as of December 31, 2007, such limitations relate to
common stock (EUR 228 million; 2006: EUR 228 million) as well as to
legal reserves required by Dutch law included under revaluation
reserves (EUR 133 million; 2006: EUR 167 million), retained earnings
(EUR 1,343 million; 2006: EUR 1,291 million) and other reserves
excluding currency translation losses (EUR 1,211 million; 2006: EUR
4,914 million), totaling EUR 2,915 million (2006: EUR 6,600 million).
The legal reserve required by Dutch law of EUR 1,343 million (2006:
EUR 1,291 million) included under retained earnings relates to
investments in afliated companies.
Other reserves are composed of cumulative translation losses of
EUR 613 million (2006: EUR 235 million gain), unrealized gains on cash
ow hedges of EUR 28 million (2006: EUR 8 million gain) and unrealized
gains on available-for-sale securities of EUR 1,183 million (2006: EUR
4,671 million gain). Unrealized gains on available-for-sale securities mainly
relate to the Company’s interest in TSMC. These unrealized gains were
reduced as a result of a further reduction of our stake in TSMC in 2007.
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Cash from derivatives
The Company has no trading derivatives. A total of EUR 385 million
cash was received with respect to foreign exchange derivative contracts
related to nancing of subsidiaries (in 2006 receipt of EUR 62 million
and in 2005 payment of EUR 46 million). Cash ow from interest-
related derivatives is part of cash ow from operating activities.
During 2007 there was a cash outow in relation to these derivatives
of EUR 2 million (in 2006 EUR 1 million cash outow).
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Proceeds from other non-current nancial assets
In 2007, the sale of TSMC shares, Nuance shares and JDS Uniphase
shares generated cash at an aggregate of EUR 4,002 million.
In 2006, there were no material proceeds from the sale of other
non-current nancial assets.
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Assets received in lieu of cash from the sale
of businesses
In 2007, the Company only received cash as consideration in connection
with the sale of businesses.
During 2006 several ownership interests were received in connection
with certain sale and transfer transactions.
At the beginning of July 2006 Philips transferred its Optical Pick Up
activities to Arima Devices receiving a 12% interest in Arima Devices
of EUR 8 million.
In June 2006, the merger was completed of Philips Mobile Display
Systems with Toppoly Optoelectronics Corporation of Taiwan to form
a new company named TPO. Philips obtained a 17.5% stake in TPO
as a consideration for the transaction valued at EUR 180 million.
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Related-party transactions
In the normal course of business, Philips purchases and sells goods
and services to various related parties in which Philips typically holds
a 50% or less equity interest and has signicant inuence. These
transactions are generally conducted with terms comparable to
transactions with third parties.
2005 2006 2007
Purchases of goods and services 1,803 2,041 1,837
Sales of goods and services 358 152 168
Receivables from related parties 53 37 26
Payables to related parties 298 271 289
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For acquisitions and divestments see note 39.
For remuneration details of the members of the Board of Management
and the Supervisory Board see note 34.
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Fair value of nancial assets and liabilities
The estimated fair value of nancial instruments has been determined
by the Company using available market information and appropriate
valuation methods. The estimates presented are not necessarily indicative
of the amounts that will ultimately be realized by the Company upon
maturity or disposal. The use of different market assumptions and/or
estimation methods may have a material effect on the estimated fair
value amounts.
December 31, 2006 December 31, 2007
carrying
amount
estimated
fair value
carrying
amount
estimated
fair value
Assets
Cash and cash equivalents 5,886 5,886 8,769 8,769
Accounts receivable -
current 4,732 4,732 4,670 4,670
Other non-current
nancial assets excluding
cost-method investments 7,012 7,012 2,156 2,156
Accounts receivable -
non-current 206 205 78 78
Main listed investments in
equity-accounted investees 2,627 2,803 1,638 2,688
Derivative instruments -
assets 298 298 275 275
Trading securities 192 192 − −
Liabilities
Accounts payable (3,443) (3,443) (3,372) (3,372)
Debt (3,878) (4,018) (3,563) (3,646)
Derivative instruments -
liabilities (101) (101) (144) (144)
The following methods and assumptions were used to estimate
the fair value of nancial instruments:
Cash and cash equivalents, accounts receivable - current
and accounts payable
The carrying amounts approximate fair value because of the short
maturity of these instruments.
Other nancial assets
For other 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 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 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, 2007, accrued interest expenses were
EUR 110 million. The accrued interest on bonds, which is the main
part of the accrual, was EUR 99 million (2006: EUR 100 million).
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Other nancial instruments, derivatives and currency risk
The Company does not purchase or hold nancial derivative instruments
for trading purposes. Assets and liabilities related to derivative
instruments are disclosed in note 47, note 48 and note 54 respectively.
Currency uctuations may impact Philips’ nancial results.
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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