Philips 2008 Annual Report Download - page 197

Reconciliation from IFRS to US GAAP
For transparency purposes for the users of the financial statements, the Company provides the following
reconciliations from IFRS to US GAAP.
Reconciliation of net income from IFRS to US GAAP
in millions of euros
20061) 20071) 2008
Net income (loss) attributable to
stockholders, as per the consolidated
statements of income on an IFRS basis 5,153 4,873 (91)
Adjustments to reconcile to US GAAP:
Reversal of capitalized product -
development cost (271) (234) (154)
Reversal of amortization and -
impairments of product
development costs 213 205 300
Reversal of additional net pensions -
and other charges (90) (74) (54)
Impairment of goodwill - −−67
Amortization of intangible assets - 40 27 24
Financial income and expenses - (1) (236) (313)
Adjustment of results of equity -
accounted investees (18) (121) −
Income tax effect on US GAAP -
adjustments 57 (37) (30)
Discontinued operations - 328 (295) (11)
Other - (30) 52 76
Net income (loss) as per the
consolidated statements of income
on a US GAAP basis 5,381 4,160 (186)
1)
Prior-period amounts have been restated to reflect a change in accounting policy
related to pensions (see Significant accounting policies, Change in
accounting policy)
and revised to reflect immaterial adjustments of intercompany profit elimination
on inventory (see Significant accounting policies, Reclassifications
and revisions)
The major differences between IFRS and US GAAP that affect stockholders’ equity and net income are
the following:
IFRS requires capitalization and subsequent amortization of development costs, if the relevant conditions
•
for capitalization are met, whereas development costs under US GAAP are recorded as an expense.
Under IFRS, if the plan assets exceed the defined-benefit obligation, the amount of net asset recognized is
•
limited to the available future benefits from the plan. The future benefit is determined as the present value
of the estimated future service costs in each year less the estimated minimum funding contributions
required in respect of the future accrual of benefits in each year. FAS 158 prescribes full recognition of
the net assets. Moreover, under US GAAP, actuarial gains and losses recognized in other comprehensive
income are recycled to the statements of income. Under IFRS, amounts directly recognised in equity are
not recycled to the statements of income.
Under IFRS an impairment loss is recognized when the carrying amount of the reporting unit exceeds its
•
recoverable amount. Such an impairment loss is allocated to goodwill first. Under US GAAP the goodwill
of a reporting unit is impaired when the carrying amount of the goodwill exceeds its implied fair value
(two-step process).
Under IFRS, goodwill is not amortized as from 2004. Since goodwill was no longer amortized as from 2002
•
under US GAAP, IFRS has two additional years of goodwill amortization. This is also a reason for differences
in equity-accounted investees between IFRS and US GAAP.
As a consequence of step-up accounting with IFRS, higher acquisition-related intangibles and amortization
•
expenses are recorded.
The composition of equity under IFRS is affected by the exemption in IFRS 1 that allows the inclusion
•
of the existing negative cumulative translation differences in retained earnings as per January 1, 2004. In
2007 TSMC and in 2008 LG Display were reclassified from equity-accounted investee to an available-for-sale
financial asset, and due to the above-mentioned difference for goodwill amortization and as a result of the
application of the exemption in IFRS 1, the recycling of translation gains and losses from equity to the
income statement differs when comparing US GAAP and IFRS.
IFRS requires up-front profit recognition of operational sale-and-leaseback transactions when the
•
sale-and-leaseback is on market conditions, whereas US GAAP requires amortization.
The differences as explained above affect income taxes and therefore deferred income taxes.
•
In 2006, the result of discontinued operations was particularly affected by the different treatment of •
development costs between US GAAP and IFRS. This resulted in a higher gain upon the sale of the
Semiconductors business under US GAAP than IFRS. In 2007, the difference in results from discontinued
operations was particularly impacted by the impairment of MedQuist, which takes into account a higher
cumulative currency translation loss under US GAAP than IFRS due to the above-mentioned IFRS 1
exemption. In 2008, the difference in results from discontinued operations was particularly affected by
the different impairment charges in 2007, which resulted in a higher gain upon the sale of MedQuist.
Reconciliation of stockholders’ equity from IFRS to US GAAP
in millions of euros
Dec. 31,
20071)
Dec. 31,
2008
Stockholders’ equity as per the consolidated
balance sheets on an IFRS basis 21,741 15,544
Adjustments to reconcile to US GAAP:
Reversal of capitalized product development -
cost (518) (357)
Reversal of pensions and other -
postretirement benefits 147 889
Goodwill amortization/impairment - 260 339
Goodwill capitalization (acquisition-related) - 76 81
Acquisition-related intangibles - (162) (152)
Equity-accounted investees - 69 (10)
Reversal of result on recognition -
of sale-and-leaseback (39) (36)
Deferred tax effect - 79 (122)
Assets from discontinued operations - 14−
Other - (25) 67
Stockholders’ equity as per the consolidated
balance sheets on a US GAAP basis 21,642 16,243
1)
Prior-period amounts have been restated to reflect a change in accounting policy
related to pensions (see Significant accounting policies, Change in accounting policy)
and revised to reflect immaterial adjustments of intercompany
profit elimination
on inventory (see Significant accounting policies, Reclassifications
and revisions)
Philips Annual Report 2008 197
254
Corporate governance
250
Reconciliation of
non-US GAAP information
262
Ten-year overview
266
Investor information