Management’s report on internal control
Management’s report on internal control over financial reporting pursuant to section 404 of the US Sarbanes-Oxley Act
The Board of Management of Koninklijke Philips N.V. (the Company) is responsible for establishing and maintaining an adequate system of internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the US Securities Exchange Act). Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with IFRS as issued by the IASB.
Internal control over financial reporting includes maintaining records that, in reasonable detail, accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Also, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Board of Management conducted an assessment of the Company’s internal control over financial reporting based on the “Internal Control- Integrated Framework (2013)” established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that assessment, the Board of Management concluded that, as of December 31, 2014, the Company’s internal control over Group financial reporting is considered effective.
The Board of Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014, excluded the following company acquired by the Company on September 2, 2014: Philips Lighting Saudi Arabia (PLSA) formerly known as General Lighting Company (GLC), domiciled in The Kingdom of Saudi Arabia. The Company owns 51% of the shares in PLSA. The total assets of this acquisition represented 1,5% of consolidated total assets as of December 31, 2014, the sales of this acquisition represented less than 1% of consolidated sales of the Company for the year ended December 31, 2014.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2014, as included in this section Group financial statements, has been audited by KPMG Accountants N.V., an independent registered public accounting firm, as stated in their report which follows hereafter.
Board of Management
Frans van Houten
February 24, 2015