Philips 2015 Annual Report Download - page 118

Group nancial statements 12.9
118 Annual Report 2015
the operation is a non-wholly owned subsidiary, then
the relevant proportionate share of the translation
dierence is allocated to Non-controlling interests.
When a foreign operation is disposed of such that
control, signicant inuence or joint control is lost, the
cumulative amount in the Currency translation
dierences related to the foreign operation is
reclassied to the Statement of income as part of the
gain or loss on disposal. When the Company disposes
of only part of its interest in a subsidiary that includes
a foreign operation while retaining control, the
respective proportion of the cumulative amount is
reattributed to Non-controlling interests. When the
Company disposes of only part of its investment in an
associate or joint venture that includes a foreign
operation while retaining signicant inuence or joint
control, the relevant proportion of the cumulative
amount is reclassied to the Statement of income.
Financial instruments
Non-derivative nancial instruments
Non-derivative nancial instruments are recognized
initially at fair value when the Company becomes a
party to the contractual provisions of the instrument.
Regular way purchases and sales of nancial assets are
accounted for at the trade date. Dividend and interest
income are recognized when earned. Gains or losses, if
any, are recorded in Financial income and expense.
Non-derivative nancial instruments comprise cash
and cash equivalents, receivables, other non-current
nancial assets, debt and other nancial liabilities that
are not designated as hedges.
Cash and cash equivalents
Cash and cash equivalents include all cash balances
and short-term highly liquid investments with an
original maturity of three months or less that are readily
convertible into known amounts of cash.
Receivables
Receivables are carried at the lower of amortized cost
or the present value of estimated future cash ows,
taking into account discounts given or agreed. The
present value of estimated future cash ows is
determined through the use of value adjustments for
uncollectible amounts. As soon as individual trade
accounts receivable can no longer be collected in the
normal way and are expected to result in a loss, they
are designated as doubtful trade accounts receivable
and valued at the expected collectible amounts. They
are written o when they are deemed to be
uncollectible because of bankruptcy or other forms of
receivership of the debtors. The allowance for the risk
of non-collection of trade accounts receivable takes
into account credit-risk concentration, collective debt
risk based on average historical losses, and specic
circumstances such as serious adverse economic
conditions in a specic country or region.
Other non-current nancial assets
Other non-current nancial assets include held-to-
maturity investments, loans receivable and available-
for-sale nancial assets and nancial assets at fair
value through prot or loss.
Held-to-maturity investments are those debt securities
which the Company has the ability and intent to hold
until maturity. Held-to-maturity debt investments are
recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts
using the eective interest method.
Loans receivable are stated at amortized cost, less
impairment.
Available-for-sale nancial assets are non-derivative
nancial assets that are designated as available-for-
sale and that are not classied in any of the other
categories of nancial assets. Subsequent to initial
recognition, they are measured at fair value and
changes therein, other than impairment losses and
foreign currency dierences on available for sale-debt
instruments are recognized in Other comprehensive
income and presented in the fair value reserve in equity.
When an investment is derecognized, the gain or loss
accumulated in equity is reclassied to the Statement
of income.
Available-for-sale nancial assets including
investments in privately-held companies that are not
associates, and do not have a quoted market price in an
active market and whose fair value could not be reliably
determined, are carried at cost.
A nancial asset is classied as fair value through prot
or loss if it is classied as held for trading or is
designated as such upon initial recognition. Financial
assets are designated as fair value through prot or loss
if the Company manages such investments and makes
purchase and sale decisions based on their fair value in
accordance with the Company’s documented risk
management or investment strategy. Financial assets at
fair value through prot or loss are measured at fair
value, and changes therein are recognized in the
Statement of income. Attributable transaction costs are
recognized in the Statement of income as incurred.
Equity
Common shares are classied as equity. Incremental
costs directly attributable to the issuance of shares are
recognized as a deduction from equity. Where the
Company purchases the Company’s equity share
capital (treasury shares), the consideration paid,
including any directly attributable incremental
transaction costs (net of income taxes), is deducted
from equity attributable to the Company’s equity
holders until the shares are cancelled or reissued.
Where such ordinary shares are subsequently reissued,
any consideration received, net of any directly