Philips 2013 Annual Report Download - page 102

6 Risk management 6.6 - 6.6
102 Annual Report 2013
can have a significant impact on the Defined Benefit
Obligation and pension cost. A negative performance of
the financial markets could have a material impact on
cash funding requirements and pension costs and also
aect the value of certain financial assets and liabilities
of the company.
For further details, please see note 30, Post-
employment benefits and note 36, Subsequent events.
Philips is exposed to a number of reporting risks.
A risk rating is assigned for each risk identified, based on
the likelihood of occurrence and the potential impact of
the risk on the financial statements and related
disclosures. In determining the probability that a risk
will result in a misstatement of a more than
inconsequential amount or material nature, the
following factors are considered to be critical:
complexity of the associated accounting activity or
transaction process, history of accounting and
reporting errors, likelihood of significant (contingent)
liabilities arising from activities, exposure to losses,
existence of a related party transaction, volume of
activity and homogeneity of the individual transactions
processed and changes to the prior period in
accounting characteristics compared to the previous
period.
Important critical reporting risk areas identified within
Philips following the risk assessment are:
• complex accounting for sales-related accruals,
warranty provisions, tax assets and liabilities,
pension benefits, and business combinations
• complex sales transactions relating to multi-element
deliveries (combination of goods and services)
• valuation procedures with respect to assets
(including goodwill and inventories)
• significant (contingent) liabilities such as
environmental claims and other litigation
• outsourcing of high volume/homogeneous
transactional finance and IT operations to third-party
service providers
• employee post-retirement benefits (as described
separately)