Philips 2015 Annual Report Download - page 117

Group nancial statements 12.9
Annual Report 2015 117
Non-controlling interests are measured at their
proportionate share of the acquiree’s identiable net
assets at the date of acquisition.
Acquisitions of and adjustments to non-controlling
interests
Acquisitions of non-controlling interests are accounted
for as transactions with owners in their capacity as
owners and therefore no goodwill is recognized.
Adjustments to non-controlling interests arising from
transactions that do not involve the loss of control are
based on a proportionate amount of the net assets of
the subsidiary.
Loss of control
Upon the loss of control, the Company derecognizes
the assets and liabilities of the subsidiary, any non-
controlling interests and the other components of
equity related to the subsidiary. Any surplus or decit
arising on the loss of control is recognized in the
Statement of income. If the Company retains any
interest in the previous subsidiary, then such interest is
measured at fair value at the date the control is lost.
Subsequently it is accounted for as either an equity-
accounted investee (associate) or as an available-for-
sale nancial asset, depending on the level of inuence
retained.
Investments in associates (equity-accounted
investees)
Associates are all entities over which the Company has
signicant inuence, but does not control. Signicant
inuence is presumed with a shareholding of between
20% and 50% of the voting rights. Investments in
associates are accounted for using the equity method
of accounting and are initially recognized at cost. The
Company’s investments in associates includes goodwill
identied on acquisition, net of any accumulated
impairment loss.
The Company’s share of the net income of these
companies is included in Results relating to
investments in associates in the Statement of income,
after adjustments to align the accounting policies with
those of the Company, from the date that signicant
inuence commences until the date that signicant
inuence ceases. Dilution gains and losses arising from
investments in associates are recognized in the
Statement of income as part of Other results relating to
investments in associates. When the Company’s share
of losses exceeds its interest in an associate, the
carrying amount of that interest (including any long-
term loans) is reduced to zero and recognition of further
losses is discontinued except to the extent that the
Company has incurred legal or constructive obligations
or made payments on behalf of the associate.
Unrealized gains on transactions between the
Company and its associates are eliminated to the
extent of the Company’s interest in the associates.
Unrealized losses are also eliminated unless the
transaction provides evidence of an impairment of the
asset transferred. Remeasurement dierences of an
equity stake resulting from gaining control over the
investee previously recorded as associate are recorded
under Results relating to investments in associates.
Foreign currencies
Foreign currency transactions
The nancial statements of all group entities are
measured using the currency of the primary economic
environment in which the entity operates (functional
currency). The euro (EUR) is the functional currency of
the Company and presentation currency of the Group
nancial statements. Foreign currency transactions are
translated into the functional currency using the
exchange rates prevailing at the dates of the
transactions or valuation where items are remeasured.
Foreign exchange gains and losses resulting from the
settlement of such transactions and from the
translation at year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies
are recognized in the Statement of income, except
when deferred in Other comprehensive income as
qualifying cash ow hedges and qualifying net
investment hedges.
Foreign currency dierences arising from translation
are recognized in the Statement of income, except for
available-for-sale equity investments which are
recognized in Other comprehensive income, unless
regarding an impairment in which case foreign currency
dierences that have been recognized in Other
comprehensive income are reclassied to the
Statement of income.
All exchange dierence items are presented as part of
Cost of sales, with the exception of tax items and
nancial income and expense, which are recognized in
the same line item as they relate in the Statement of
income.
Non-monetary assets and liabilities denominated in
foreign currencies that are measured at fair value are
retranslated to the functional currency using the
exchange rate at the date the fair value was
determined. Non-monetary items in a foreign currency
that are measured based on historical cost are
translated using the exchange rate at the transaction
date.
Foreign operations
The assets and liabilities of foreign operations,
including goodwill and fair value adjustments arising on
acquisition, are translated to euro at exchange rates at
the reporting date. The income and expenses of foreign
operations are translated to euro at exchange rates at
the dates of the transactions.
Foreign currency dierences arising on translation of
foreign operations into euro are recognized in Other
comprehensive income, and presented as part of
Currency translation dierences in Equity. However, if