Philips 2013 Annual Report Download - page 128

11 Group financial statements 11 - 11.2
128 Annual Report 2013
11 Group financial statements
Introduction
This section of the Annual Report contains the audited consolidated
financial statements including the notes thereon that have been prepared
in accordance with International Financial Reporting Standards (IFRS) as
endorsed by the European Union (EU) and with the statutory provisions of
Part 9, Book 2 of the Dutch Civil Code. All standards and interpretations
issued by the International Accounting Standards Board (IASB) and the
IFRS Interpretations Committee eective year-end 2013 have been
endorsed by the EU, except that the EU did not adopt some paragraphs of
IAS 39 applicable to certain hedge transactions. Philips has no hedge
transactions to which these paragraphs are applicable. Consequently, the
accounting policies applied by Philips also comply fully with IFRS as
issued by the IASB.
Together with the section Company financial statements, this section
contains the statutory financial statements of the Company.
The following sections and chapters:
• chapter 1, Accelerate!, of this Annual Report
• chapter 2, Building a great company, of this Annual Report
• chapter 3, Delivering innovation that matters to you, of this Annual
Report
• chapter 4, Group performance, of this Annual Report
• chapter 5, Sector performance, of this Annual Report
• chapter 6, Risk management, of this Annual Report
• section 9.1, Report of the Corporate Governance and Nomination &
Selection Committee, of this Annual Report
• section 9.2, Report of the Remuneration Committee, of this Annual
Report
• chapter 10, Corporate governance, of this Annual Report
• chapter 18, Forward-looking statements and other information, of this
Annual Report
form the Management report within the meaning of section 2:391 of the
Dutch Civil Code (and related Decrees).
The sections Group performance and Sector performance provide an
extensive analysis of the developments during the financial year 2013 and
the results. The term EBIT has the same meaning as Income from
operations (IFO), and is used to evaluate the performance of the business.
These sections also provide information on the business outlook,
investments, financing, personnel and research and development
activities.
The Statement of income included in the section Company financial
statements has been prepared in accordance with section 2:402 of the
Dutch Civil Code, which allows a simplified Statement of income in the
Company financial statements in the event that a comprehensive
Statement of income is included in the consolidated Group financial
statements.
For ‘Additional information’ within the meaning of section 2:392 of the
Dutch Civil Code, please refer to section 11.10, Independent auditor’s
report - Group, of this Annual Report on the Group financial statements,
section 12.5, Independent auditor’s report - Company, of this Annual
Report on the Company financial statements, section 4.4, Proposed
distribution to shareholders, of this Annual Report, and note 36,
Subsequent events.
Please refer to chapter 18, Forward-looking statements and other
information, of this Annual Report for more information about forward-
looking statements, third-party market share data, fair value information,
and revisions and reclassifications.
The Board of Management of the Company hereby declares that, to the
best of our knowledge, the Group financial statements and Company
financial statements give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole and that the management
report referred to above gives a true and fair view concerning the position
as per the balance sheet date, the development and performance of the
business during the financial year of the Company and the undertakings
included in the consolidation taken as a whole, together with a description
of the principal risks that they face.
Board of Management
Frans van Houten
Ron Wirahadiraksa
Pieter Nota
February 25, 2014
11.1 Management’s report on internal control
Management’s report on internal control over financial reporting
pursuant to section 404 of the US Sarbanes-Oxley Act
The Board of Management of Koninklijke Philips N.V. (the Company) is
responsible for establishing and maintaining an adequate system of
internal control over financial reporting (as such term is defined in Rule
13a-15(f) under the US Securities Exchange Act). Internal control over
financial reporting is a process to provide reasonable assurance regarding
the reliability of our financial reporting for external purposes in
accordance with IFRS as issued by the IASB.
Internal control over financial reporting includes maintaining records that,
in reasonable detail, accurately and fairly reflect our transactions;
providing reasonable assurance that transactions are recorded as
necessary for preparation of our financial statements; providing
reasonable assurance that receipts and expenditures of company assets
are made in accordance with management authorization; and providing
reasonable assurance that unauthorized acquisition, use or disposition of
company assets that could have a material eect on our financial
statements would be prevented or detected on a timely basis. Because of
its inherent limitations, internal control over financial reporting is not
intended to provide absolute assurance that a misstatement of our
financial statements would be prevented or detected. Also, projections of
any evaluation of the eectiveness of internal control over financial
reporting to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
The Board of Management conducted an assessment of the Company’s
internal control over financial reporting based on the “Internal Control-
Integrated Framework (1992)” established by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Based on
that assessment, the Board of Management concluded that, as of
December 31, 2013, the Company’s internal control over Group financial
reporting is considered eective.
The eectiveness of the Company’s internal control over financial
reporting as of December 31, 2013, as included in this section Group
financial statements, has been audited by KPMG Accountants N.V., an
independent registered public accounting firm, as stated in their report
which follows hereafter.
Board of Management
Frans van Houten
Ron Wirahadiraksa
Pieter Nota
February 25, 2014
11.1.1 Changes in internal control over financial reporting
During the year ended December 31, 2013, there have been no changes in
our internal control over financial reporting that have materially aected,
or are reasonably likely to materially aect, our internal control over
financial reporting.
11.2 Report of the independent auditor
The report set out below is provided in compliance with the standards of
the Public Company Accounting Oversight Board in the US and includes
an opinion on the eectiveness of internal control over financial reporting
as at December 31, 2013. Management’s report on internal control over