Philips 2014 Annual Report Download - page 142

Group nancial statements 12.9
142 Annual Report 2014
Philips Group
Key assumptions in %
2014
compound sales growth rate1)
initial
forecast
period
extra-
polation
period2)
used to
calculate
terminal
value
pre-tax
discount
rates
Respiratory Care &
Sleep Management 4.2 3.6 2.7 11.4
Imaging Systems 3.3 3.1 2.7 12.8
Patient Care &
Monitoring
Solutions 4.9 3.8 2.7 12.8
Professional
Lighting Solutions 10.1 6.5 2.7 13.8
1) Compound sales growth rate is the annualized steady growth rate over
the forecast period
2) Also referred to later in the text as compound long-term sales growth
rate
The assumptions used for the 2013 cash ow
projections were as follows:
Philips Group
Key assumptions in %
2013
compound sales growth rate1)
initial
forecast
period
extra-
polation
period2)
used to
calculate
terminal
value
pre-tax
discount
rates
Respiratory Care &
Sleep Management 4.9 3.7 2.7 11.3
Imaging Systems 3.9 3.4 2.7 12.4
Patient Care &
Clinical Informatics 4.1 3.5 2.7 13.2
Professional
Lighting Solutions 7.4 5.4 2.7 12.8
1) Compound sales growth rate is the annualized steady growth rate over
the forecast period
2) Also referred to later in the text as compound long-term sales growth
rate
Among the mentioned units, Respiratory Care & Sleep
Management and Professional Lighting Solutions have
the highest amount of goodwill and the lowest excess
of the recoverable amount over the carrying amount.
Based on the annual impairment test performed in the
second quarter, the headroom of Respiratory Care &
Sleep Management was estimated at EUR 820 million.
Based on the updated test performed in Q4, the
headroom of Professional Lighting Solutions was
estimated at EUR 1,000 million. The following changes
could, individually, cause the value in use to fall to the
level of the carrying value:
Philips Group
Sensitivity analysis
increase in
pre-tax
discount rate,
basis points
decrease in
compound
long-term
sales growth
rate, basis
points
decrease in
terminal value
amount, %
Respiratory
Care & Sleep
Management 380 680 49
Professional
Lighting
Solutions 400 1,030 47
The results of the annual impairment test of Imaging
Systems and Patient Care & Monitoring Solutions have
indicated that a reasonably possible change in key
assumptions would not cause the value in use to fall to
the level of the carrying value.
Impairment charge 2013
In the fourth quarter of 2013, the updated impairment
test for Consumer Luminaires resulted in EUR 26 million
impairment. This was mainly a consequence of reduced
growth rate due to slower anticipated recovery of
certain markets and introduction delays of new product
ranges. The pre-tax discount rate applied in the
mentioned Q4 2013 test was 13.5%. The pre-tax
discount rate applied in the 2013 annual impairment
test was 13.4%. Compared to the previous impairment
test there has been no change in the organization
structure which impacts how goodwill is allocated to
this cash-generating unit.
Additional information 2014
In addition to the units with signicant goodwill, other
cash-generating units are sensitive to uctuations in
the assumptions as set out above.
Based on the most recent impairment test, it was noted
that the headroom for the cash-generating unit Home
Monitoring was EUR 30 million. An increase of 150
points in the pre-tax discount rate, a 310 basis points
decline in the compound long-term sales growth rate
or a 21% decrease in terminal value would cause its
value in use to fall to the level of its carrying value. The
goodwill allocated to Home Monitoring at December 31,
2014 amounts to EUR 34 million.
Based on the most recent impairment test, it was noted
that with regard to the headroom for the cash-
generating unit Consumer Luminaires the estimated
recoverable amount approximates the carrying value of
this cash-generating unit. Consequently, any adverse
change in key assumptions would, individually, cause
an impairment loss to be recognized. The goodwill
allocated to Consumer Luminaires at December 31,
2014 amounts to EUR 112 million.
Please refer to note 2, Information by sector and main
country for a specication of goodwill by sector.