Philips 2014 Annual Report Download - page 171

31 Group nancial statements 12.9
Annual Report 2014 171
September 2014 the option matured with the changes
of fair value of EUR 7 million recorded as nancial
income and expense.
Deferred consideration and loan extension options to
TP Vision were included in level 3 in 2013. In May, 2014
Philips transferred the loans from TP Vision to TPV
Technology Limited. As a result, the extension options
ceased to exist with the changes of fair value of EUR 13
million recorded in the prot and loss.
The table below shows the reconciliation from the
beginning balance to the end balance for fair value
measured in Level 3 of the fair value hierarchy.
Philips Group
Reconciliation of the fair value hierarchy in millions of EUR
2014
nancial
assets
nancial
liabilities
Balance as of January 1, 2014 61 (13)
Total gains and losses recognized in:
-prot or loss 5 13
- other comprehensive income (8) –
Balance as of December 31, 2014 58 –
Philips has the following balances related to its
derivative activities. These transactions are subject to
master netting and set-o agreements. In case of
certain termination events, under the terms of the
Master Agreement, Philips can terminate the
outstanding transactions and aggregate their positive
and negative values to arrive at a single net termination
sum (or close-out amount). This contractual right is
subject to the following:
• The right may be limited by local law if the
counterparty is subject to bankruptcy proceedings;
• The right applies on a bilateral basis.
Philips Group
Financial assets subject to osetting, enforceable master netting
arrangements or similar agreements in millions of EUR
2013 - 2014
2013 2014
Derivatives
Gross amounts of recognized nancial assets 150 207
Gross amounts of recognized nancial liabilities
oset in the balance sheet – –
Net amounts of nancial assets presented in
the balance sheet 150 207
Related amounts not oset in the balance sheet
Financial instruments (85) (161)
Cash collateral received – –
Net amount 65 46
Philips Group
Financial liabilities subject to osetting, enforceable master
netting arrangements or similar agreements in millions of EUR
2013 - 2014
2013 2014
Derivatives
Gross amounts of recognized nancial liabilities (368) (857)
Gross amounts of recognized nancial assets
oset in the balance sheet – –
Net amounts of nancial liabilities presented in
the balance sheet (368) (857)
Related amounts not oset in the balance sheet
Financial instruments 85 161
Cash collateral received – –
Net amount (283) (696)
31 Details of treasury / other nancial risks
Philips is exposed to several types of nancial risks. This
note further analyzes nancial risks. Philips does not
purchase or hold derivative nancial instruments for
speculative purposes. Information regarding nancial
instruments is included in note 30, Fair value of nancial
assets and liabilities.
Liquidity risk
Liquidity risk is the risk that an entity will encounter
diculty in meeting obligations associated with
nancial liabilities.
Liquidity risk for the group is monitored through the
Treasury liquidity committee which tracks the
development of the actual cash ow position for the
group and uses input from a number of sources in order
to forecast the overall liquidity position both on a short
and long term basis. Group Treasury invests surplus
cash in money market deposits with appropriate
maturities to ensure sucient liquidity is available to
meet liabilities when due.
The rating of the Company’s debt by major rating
services may improve or deteriorate. As a result, Philips’
future borrowing capacity may be inuenced and its
nancing costs may uctuate. Philips has various
sources to mitigate the liquidity risk for the group. At
December 31, 2014, Philips had EUR 1,873 million in cash
and cash equivalents (2013: EUR 2,465 million), within
which short-term deposits of EUR 1,057 million (2013:
EUR 1,714 million) and other liquid assets of EUR 121
million (2013: EUR 18 million). Philips pools cash from
subsidiaries to the extent legally and economically
feasible; cash not pooled remains available for
operational or investment needs by the Company.
Furthermore, Philips has a USD 2.5 billion Commercial
Paper Program and a EUR 1.8 billion revolving credit
facility that can be used for general group purpose and
as a backstop for its commercial paper program. In
January 2013 the EUR 1.8 billion facility was extended
by 2 years until February 18, 2018. The facility has no
nancial covenants and repetitive material adverse