Philips 2011 Annual Report Download - page 91
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7 Risk management 7.6 - 7.6
Annual Report 2011 91
carried forward and potential changes in tax law that
could result in higher tax expense and payments. Those
uncertainties may have a significant impact on local tax,
results which in turn could adversely affect Philips’
financial condition and operating results.
The value of the losses carried forward is subject to having
sufficient taxable income available within the loss-carried-
forward period, but also to having sufficient taxable
income within the foreseeable future in the case of losses
carried forward with an indefinite carry-forward period.
The ultimate realization of the Company’s deferred tax
assets, including tax losses and credits carried forward, is
dependent upon the generation of future taxable income
in the countries where the temporary differences, unused
tax losses and unused tax credits were incurred and
during the periods in which the deferred tax assets
become deductible. Additionally, in certain instances,
realization of such deferred tax assets is dependent upon
the successful execution of tax planning strategies.
Accordingly, there can be no absolute assurance that all
(net) tax losses and credits carried forward will be
realized.
For further details, please refer to the fiscal risks
paragraph in note 3, Income taxes.
Philips has defined-benefit pension plans in a number of
countries. The funded status and the cost of maintaining
these plans are influenced by financial market and
demographic developments, creating volatility in Philips’
financials.
The majority of employees in Europe and North America
are covered by defined-benefit pension plans. The
accounting for defined-benefit pension plans requires
management to determine discount rates, expected rates
of compensation and expected returns on plan assets.
Changes in these variables can have a significant impact on
the projected benefit obligations and net periodic pension
costs. A negative performance of the financial markets
could have a material impact on funding requirements and
net periodic pension costs and also affect the value of
certain financial assets and liabilities of the company.
For further details, please see note 29, Pensions and other
postretirement benefits.