Philips 2007 Annual Report Download - page 98

Philips Annual Report 2007104
Philips is exposed to a number of different tax uncertainties
which could have a signicant impact on local tax results.
Philips is exposed to a number of different tax uncertainties
which could result in double taxation, penalties and interest
payments. These include, amongst others, transfer pricing
uncertainties on internal cross-border deliveries of goods
and services, tax uncertainties related to acquisitions and
divestments, tax uncertainties related to the use of tax
credits and permanent establishments, and tax uncertainties
due to losses carried forward and tax credits carried forward.
Those uncertainties may have a signicant impact on local
tax results.
For further details, please refer to the section Fiscal that
begins on page 111 of this Annual Report.
Legal proceedings covering a range of matters are
pending in various jurisdictions against Philips and
its (former) group companies. Due to the uncertainty
inherent in legal proceedings, it is difcult to predict the
nal outcome. Adverse outcomes might impact Philips’
nancial position and results.
Philips, including a certain number of its (former) group
companies, is involved in legal proceedings relating to such
matters as competition issues, commercial transactions,
product liability (including allegations of personal injury
from alleged asbestos exposure), participations and
environmental pollution. Since the ultimate disposition
of asserted claims and proceedings, or the impact of any
claims that may be asserted in the future, cannot be
predicted with certainty, Philips’ nancial position and
results of operations could be affected by adverse outcomes.
Please refer to note 27 for additional disclosure relating
to specic legal proceedings.
Compliance risks
Exposure to non-compliance with general business
principles in emerging markets.
Corporate governance systems, including information
structures and ethical standards, are less developed
in emerging markets compared to mature markets.
Realization of growth targets in emerging markets
exposes Philips’ management to risk of non-compliance
with general business principles. Examples include
commission payments to third parties, remuneration
payments to agents, distributors, commissioners and the
like (‘Agents’), or the acceptance of gifts, which may be
considered normal local business practice. For further
details, please refer to the section Philips General
Business
Principles of the Risk Management chapter
of this Annual Report.
Reliability of reporting, correctness of disclosures and
safeguarding of assets.
The reliability of reporting is important in ensuring that
management decisions for steering the businesses and
managing both top-line and bottom-line growth are
based on top-quality data. Flaws in internal control
systems could adversely affect the nancial position
and results and hamper expected growth.
The correctness of disclosures provides investors and
other market professionals with signicant information
for a better understanding of Philips’ businesses.
Imperfections or lack of clarity in the disclosures
could create market uncertainty regarding the reliability
of the data presented and may have a negative impact on
the Philips share price.
Compliance procedures have been adopted by management
to ensure that the use of resources is consistent with
laws, regulations and policies, and that resources are
safeguarded against waste, loss and misuse. Ineffective
compliance procedures relating to the safeguarding of
assets could have an adverse effect on the nancial results.
Non-compliance with data privacy and product security laws
Philips’ brand image and reputation will be adversely
impacted by non-compliance with the various (patient)
data privacy and (medical) product security laws. Privacy
and product security issues may arise with respect to
remote access or monitoring of patient data or loss of
data on customers’ systems.
Details of nancial risks
This section provides further details of the nancial risks,
which are categorized along the lines of the corporate
processes Treasury, Pensions, Fiscal and Legal.
Treasury
Philips is, as mentioned before, exposed to several types
of nancial risk. This section further analyzes nancial
risks. Philips does not purchase or hold derivative
instruments for speculative purposes. Information
regarding nancial instruments is included in note 36
and note 69 of the notes to the nancial statements.
8 Financial highlights 10 Message from the President 16 The Philips Group 62 The Philips sectors