Philips 2008 Annual Report Download - page 224

In 2007, income from the sale of securities totaled EUR 2,804 million.
This included EUR 2,783 million gain from the sale of shares in TSMC,
EUR 31 million gain on the sale of shares in Nuance Communications,
and EUR 10 million loss on the sale of shares in JDS Uniphase. These
gains were offset by an impairment of EUR 36 million for JDS Uniphase.
Furthermore, other financial income included a EUR 12 million gain
related to the revaluation of the convertible bond received from TPV
Technology and a EUR 128 million cash dividend from TSMC.
In 2006, a EUR 77 million impairment of TPO was recorded. This is
offset by other financial income of EUR 293 million, which included a
cash dividend of EUR 223 million from TSMC, a gain of EUR 97 million
upon designation of the TSMC shares received through a stock dividend
as trading securities and a EUR 29 million gain as a result of increases
in the fair value of the trading securities held in TSMC. This is offset
by a EUR 61 million loss as a result of the fair value change in the
conversion option embedded in the convertible bond received from
TPV Technology.
42
Income taxes
The tax expense on income before tax amounted to EUR 256 million
(2007: EUR 582 million, 2006: EUR 223 million).
The components of income before taxes and income tax expense
are as follows:
2006 2007 2008
Netherlands 364 2,968 330
Foreign 1,001 1,748 (188)
Income before taxes 1,365 4,716 142
Netherlands:
Current taxes 81 (41) 20
Deferred taxes (23) (155) (120)
58 (196) (100)
Foreign:
Current taxes (274) (360) (289)
Deferred taxes (7) (26) 133
(281) (386) (156)
Income tax expense (223) (582) (256)
Deferred tax expense
2006 2007 2008
Previously unrecognized tax losses
carried forwards realized 20 5 21
Current year tax losses carried
forward not realized (26) (38) (98)
Temporary differences
(not recognized) recognized (42) 156 (2)
Prior year results 44 25 (7)
Tax rate changes 64 (99) (1)
Origination and reversal
of temporary differences (90) (230) 100
(30) (181) 13
Philips’ operations are subject to income taxes in various foreign
jurisdictions. The statutory income tax rates vary from 10.0% to
40.7%, which causes a difference between the weighted average
statutory income tax rate and the Netherlands’ statutory income
tax rate of 25.5%. (2007: 25.5%; 2006: 29.6%).
A reconciliation of the weighted average statutory income tax rate
to the effective income tax rate is as follows:
in % 2006 2007 2008
Weighted average statutory income
tax rate 25.4 26.4 (18.5)
Tax rate effect of:
Changes related to:
utilization of previously reserved loss -
carryforwards (1.5) (0.1) (14.5)
new loss carryforwards not -
expected to be realized 1.9 0.8 69.3
addition (releases) - 3.1 (3.3) 1.6
Non-tax deductible impairment charges −0.2 283.1
Non-taxable income (14.4) (16.3) (315.0)
Non-tax-deductible expenses 8.0 1.1 91.9
Withholding and other taxes 1.2 (0.2) (5.1)
Tax rate changes (4.7) 2.1 1.0
Tax expenses due to other liabilities −1.6 37.2
Tax incentives and other (2.7) −49.2
Effective tax rate 16.3 12.3 180.2
The weighted average statutory income tax rate decreased in 2008
compared to 2007 due to a significant change in country mix of
income tax rates, due to losses in countries with higher income tax
rates and profits in countries with relatively lower income tax rates,
combined with a lower income before tax.
The effective income tax rate is higher than the weighted average
statutory income tax rate in 2008, mainly due to new losses carried
forward not expected to be realized, non-tax-deductible impairment
charges, and income tax expenses due to tax provisions for uncertain
tax positions, which were partly offset by non-taxable gains on the
sale of securities and other non-taxable income.
Philips Annual Report 2008224
180
Sustainability performance
244
Company financial statements
124
US GAAP financial statements
192
IFRS financial statements
Notes to the IFRS financial
statements