Philips 2007 Annual Report Download - page 240

Philips Annual Report 2007246
Explanation of Non-US GAAP measures
Koninklijke Philips Electronics N.V. (the ‘Company’)
believes that an understanding of sales performance
is enhanced when the effects of currency movements
and acquisitions and divestments (changes in consolidation)
are excluded. Accordingly, in addition to presenting
‘nominal growth’, ‘comparable growth’ is also provided.
Comparable sales exclude the effects of currency
movements and changes in consolidation. As indicated
in the Accounting Policies, sales and income are translated
from foreign currencies into the Company’s reporting
currency, the Euro, at the exchange rate on transaction
dates during the respective years. As a result of signicant
currency movements during the years presented, the
effects of translating foreign currency sales amounts
into euros had a material impact that has been excluded
in arriving at the comparable sales in euros. Currency
effects have been calculated by translating previous
years’ foreign currency sales amounts into euros at the
following year’s exchange rates in comparison with
the sales in euros as historically reported. Years under
review were characterized by a number of acquisitions
and divestments, as a result of which activities were
consolidated or deconsolidated. The effect of consolidation
changes has also been excluded in arriving at the comparable
sales. For the purpose of calculating comparable sales
growth, when a previously consolidated entity is sold
or contributed to a venture that is not consolidated by
the Company, relevant sales are excluded from impacted
prior-year periods. Similarly, when an entity is acquired,
relevant sales are excluded from impacted periods.
The Company uses the term EBITA to evaluate the
performance of the Philips Group and its operating
divisions. Referencing EBITA will make the underlying
performance of our businesses more transparent by
factoring out the amortization of intangible assets,
which arises when acquisitions are consolidated.
EBITA represents income from continuing operations
excluding results attributable to minority interest
holders, results relating to equity-accounted investees,
income taxes, nancial income and expenses,
amortization & impairment on intangible assets
(excluding software) and write-off of in-process R&D.
The Company believes that an understanding of the
Philips Group’s nancial condition is enhanced by the
disclosure of net operating capital (NOC), as this gure
is used by Philips’ management to evaluate the capital
efciency of the Philips Group and its operating divisions.
NOC is dened as: total assets excluding assets from
discontinued operations less: (a) cash and cash equivalents,
(b) deferred tax assets, (c) other non-current nancial
assets, (d) investments in equity-accounted investees,
and after deduction of: (e) provisions excluding
deferred tax liabilities, (f) accounts and notes payable,
(g) accrued liabilities, (h) current/non-current liabilities,
and (i) trading securities.
Net debt is dened as the sum of long- and short-term
debt minus cash and cash equivalents. The net debt
position as a percentage of the sum of total group equity
(stockholders’ equity and minority interests) and net
debt is presented to express the nancial strength of
the Company. This measure is widely used by investment
analysts and is therefore included in the disclosure.
Cash ows before nancing activities, being the sum
total of net cash from operating activities and net cash
from investing activities, are presented separately to
facilitate the reader’s understanding of the Company’s
funding requirements.
Reconciliation of non-US GAAP information
all amounts based on US GAAP and in millions of euros unless otherwise stated
128 Group nancial statements 188 IFRS information 240 Company nancial statements