Philips 2015 Annual Report Download - page 166

Group nancial statements 12.9 31
166 Annual Report 2015
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
2015
nancial assets
Balance as of January 1, 2015 58
Gains and losses recognized in:
- in prot or loss 9
- in other comprehensive income 15
Transfer into level 3 13
Purchase 7
Sales (47)
Balance as of December 31, 2015 55
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
2014 - 2015
2014 2015
Derivatives
Gross amounts of recognized nancial assets 207 161
Gross amounts of recognized nancial liabilities
oset in the balance sheet - -
Net amounts of nancial assets presented in
the balance sheet 207 161
Related amounts not oset in the balance sheet
Financial instruments (161) (81)
Cash collateral received - -
Net amount 46 80
Philips Group
Financial liabilities subject to osetting, enforceable master
netting arrangements or similar agreements in millions of EUR
2014 - 2015
2014 2015
Derivatives
Gross amounts of recognized nancial liabilities (857) (933)
Gross amounts of recognized nancial assets
oset in the balance sheet - -
Net amounts of nancial liabilities presented in
the balance sheet (857) (933)
Related amounts not oset in the balance sheet
Financial instruments 161 81
Cash collateral received - -
Net amount (696) (852)
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, 2015, Philips had EUR 1,766 million in cash
and cash equivalents (2014: EUR 1,873 million), within
which short-term deposits of EUR 855 million (2014:
EUR 1,057 million) and other liquid assets of EUR 171
million (2014: EUR 121 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
change clauses and can be used for general group
purposes. As of December 31, 2015, Philips did not have
any amounts outstanding under any of these facilities.
Additionally Philips also held EUR 75 million of equity
investments in available-for-sale nancial assets (fair
value at December 31, 2015).
Currency risk
Currency risk is the risk that reported nancial
performance or the fair value or future cash ows of a
nancial instrument will uctuate because of changes
in foreign exchange rates. Philips operates in many
countries and currencies and therefore currency