Philips 2012 Annual Report Download - page 141

12 Group financial statements 12.11 - 12.11 3
Annual Report 2012 141
financial assets for more details) and EUR 4 million resulted from the
sale of SHL Telemedicine Ltd.. Interest income from loans and
receivables included EUR 15 million related to interest received on the
convertible bonds received from the shareholding in TPV Technology
and CBaySystems Holdings (CBAY). Total finance expense of EUR 335
million included EUR 21 million of losses mainly in relation to fair value
revaluations on the convertible bonds received from TPV Technology
and CBAY prior to their redemption in September and October
respectively.
3Income taxes
The tax expense on income before tax amounted to EUR 308 million
(2011: EUR 283 million, 2010: EUR 497 million).
The components of income before taxes and income tax expense are
as follows:
2010 2011 2012
Netherlands 952 244 (158)
Foreign 1,001 (753) 942
Income before taxes of continuing
operations 1,953 (509) 784
Netherlands:
Current tax income (expense) (103) (40) (79)
Deferred tax income (expense) (144) 44 (43)
(247) 4 (122)
Foreign:
Current tax income (expense) (210) (360) (280)
Deferred tax income (expense) (50) 149 117
(260) (211) (163)
Income tax expense of continuing
operations (497) (283) (308)
Income tax expense of discontinued
operations (10) 76 23
Income tax expense (507) (207) (285)
The components of income tax expense are as follows:
2010 2011 2012
Current tax expense (357) (390) (371)
Prior year results 44 (10) 12
Current tax income (expense) (313) (400) (359)
2010 2011 2012
Recognition of previously unrecognized
tax losses 9 20 1
Current year tax loss carried forwards
not recognized (55) (89) (50)
Temporary differences (not recognized)
recognized (5) 15 2
Prior year results (16) 31 (2)
Tax rate changes (4) (1) (4)
Origination and reversal of temporary
differences (125) 217 127
Deferred tax income (expense) (196) 193 74
Philips’ operations are subject to income taxes in various foreign
jurisdictions. The statutory income tax rates vary from 10.0% to 42.0%,
which results in a difference between the weighted average statutory
income tax rate and the Netherlands’ statutory income tax rate of 25%
(2011: 25.0%; 2010: 25.5%).
A reconciliation of the weighted average statutory income tax rate to
the effective income tax rate of continuing operations is as follows:
in %
2010 2011 2012
Weighted average statutory income tax
rate 26.6 55.4 25.8
Tax rate effect of:
Changes related to:
- utilization of previously reserved loss
carryforwards (0.5) 3.9 (0.1)
- new loss carryforwards not expected
to be realized 2.1 (17.6) 6.4
- addition (releases) 0.3 2.9 (0.3)
Non-tax-deductible impairment charges − (98.3) 0.3
Non-taxable income (7.5) 11.1 (7.6)
Non-tax-deductible expenses 3.9 (22.4) 27.9
Withholding and other taxes 1.2 (4.5) 2.8
Tax rate changes 0.2 (0.1) 0.5
Prior year tax results (1.4) 4.5 (1.2)
Tax expenses due to other liabilities (0.4) (9.0) 1.2
Tax incentives and other 0.9 18.5 (16.4)
Effective tax rate 25.4 (55.6) 39.3
The weighted average statutory income tax rate decreased in 2012
compared to 2011, as a consequence of a change in the country mix of
income tax rates, as well as a significant change of the mix of profits
and losses in the various countries.
The effective income tax rate is higher than the weighted average
statutory income tax rate in 2012, mainly due to the non-tax-
deductible European Commission ruling for the alleged violation of
competition rules in the Cathode-Ray Tubes (CRT) industry, new
losses carryforward not expected to be realized, and income tax
expenses due to tax provisions for uncertain tax positions, which were
partly offset by non-taxable income as well as incidental tax benefits.