Philips 2013 Annual Report Download - page 153

11 Group financial statements 11.9 - 11.9 6
Annual Report 2013 153
implementation of GSAs, apply benefit tests for particular countries or
audit the use of tax credits attached to GSAs and royalty payments, and
may reject the implemented procedures. Furthermore, buy in/out
situations in the case of (de)mergers could aect the tax allocation of GSAs
between countries. The same applies to the specific allocation contracts.
Tax uncertainties due to disentanglements and acquisitions
When a subsidiary of Philips is disentangled, or a new company is
acquired, related tax uncertainties arise. Philips creates merger and
acquisition (M&A) teams for these disentanglements or acquisitions. In
addition to representatives from the involved sector, these teams consist
of specialists from various group functions and are formed, amongst other
things, to identify hidden tax uncertainties that could subsequently
surface when companies are acquired and to reduce tax claims related to
disentangled entities. These tax uncertainties are investigated and
assessed to mitigate tax uncertainties in the future of the extent possible.
Several tax uncertainties may surface from M&A activities. Examples of
uncertainties are: applicability of the participation exemption, allocation
issues, and non-deductibility of parts of the purchase price.
Tax uncertainties due to permanent establishments
In countries where Philips starts new operations or alters business models,
the issue of permanent establishment may arise. This is because when
operations in a country involves a Philips organization in another country,
there is a risk that tax claims will arise in the former country as well as in the
latter country.
6Interests in entities
In this section we discuss the nature of, and risks associated with, the
Company’s interests in its consolidated entities and associates, and the
eects of those interests on the Company’s financial position and financial
performance.
Interests in entities could in principle relate to:
• Interests in subsidiaries
• Joint arrangements
• Unconsolidated structured entities
• Investments in associates
Interests in subsidiaries
Wholly owned subsidiaries
The Group financial statements comprise the assets and liabilities of
approximately 400 legal entities. Set out below is a list of material
subsidiaries representing greater than 5% of either the consolidated group
sales, income from operations or net income (before any intra-group
eliminations). All of the entities are 100% owned and have been for the last
3 years.
Interests in subsidiaries
in order of EBIT (decreasing)
Legal entity name
Principal country of
business
Philips Electronics North America Corporation United States
Philips Medizin Systeme Böblingen GmbH Germany
Philips Consumer Lifestyle B.V. Netherlands
Philips Ultrasound, Inc. United States
Philips (China) Investment Company, Ltd. China
Philips Lighting Poland S.A. Poland
Philips Innovative Applications Belgium
Philips Medical Systems Nederland B.V. Netherlands
RIC Investments, LLC United States
Philips Lighting B.V. Netherlands
Philips Oral Healthcare, Inc. United States
Philips Medical Systems DMC GmbH Germany
Philips GmbH Germany
Not wholly owned subsidiaries
Among the consolidated legal entities is one entity where the Company
owns 44% of the voting power. We have determined that the Company
controls this entity on a de facto power basis. The sales, income from
operations and net income of this entity is less than 1% of the consolidated
financial data of the company and therefore not considered material.
In total eleven consolidated subsidiaries are not wholly owned by the
Company. The sales, income from operations and net income of these
entities (before any intra-group eliminations) are less than 3% of the
consolidated financial data of the company and therefore not considered
material.
Joint arrangements and unconsolidated structured entities
The Company did not have joint arrangements or unconsolidated
structured entities that require separate disclosure under IFRS 12.
Investments in associates
Philips has investments in a number of associates, none of them are
regarded as individually material.
The changes during 2013 are as follows:
Investments in associates
Total investments
Balance as of January 1, 2013 177
Changes:
Sales/Redemption (2)
Reclassifications (7)
Share in income 5
Dividends declared (6)
Translation and exchange rate dierences (6)
Balance as of December 31, 2013 161
Philips has agreed that it will transfer the remaining 30% stake in the TP
Vision venture, which has a book value of nil as at December 31, 2013, to
TPV. The net impact of a transaction-related payment has been accrued in
Other current liabilities at December 31, 2013 due to conditions that
existed at the balance sheet date.
The Company owns four equity interests which represent more than 20%
in the capital of the underlying companies. With respect to these equity
interests, the Company cannot exercise significant influence based on
governance agreements concluded among shareholders. These equity
interests are accounted for as Other non-current financial assets. In 2013,
the Company’s share in net income of these entities was insignificant.
The Company has one investment where it owns 51% of the shares of an
entity, however is not able to control it and therefore it is not consolidated
but accounted for as an investment in associate.
During 2013 the Company’s shareholding in two of its investments in
associates was diluted and subsequently treated as available-for-sale
financial assets. The dilution gains of EUR 16 million are recognized under
results related to investments in associates.
The Company has not recognized a proportional share of losses, totaling
EUR 37 million (2012: EUR 9 million) in relation to its investments in
associates because the Company has no obligation in respect of these
losses.
Summarized information of investments in associates
Unaudited summarized financial information on the Company’s most
significant investments in associates, on a combined basis, is presented
below. It is based on the most recent available financial information.
Included from April 2012 is the 30%-interest in TP Vision Holding which
includes the former Philips TV business.