Discontinued operations and other assets classified as held for sale

Discontinued operations included in the Consolidated statements of income and the Consolidated statements of cash flows consist of the combined Lumileds and Automotive businesses, the Audio, Video, Multimedia and Accessories (AVM&A) business and certain other divestments reported as discontinued operations.

Discontinued operations: Combined Lumileds and Automotive businesses

Philips announced in a press release on June 30, 2014, that it will start the process to combine its Lumileds (LED components) and Automotive businesses into a stand-alone company within the Philips Group and that it will explore strategic options to attract capital from third-party investors for this business.

The company is in discussion with external investors for the combined Lumileds and Automotive Lighting businesses and expects to complete a transaction in the first half of 2015.

The combined businesses of Lumileds and Automotive were reported as discontinued operations in the Consolidated statements of income and Consolidated statements of cash flows with the related assets and liabilities as per the end of November 2014 included as Assets classified as held for sale and Liabilities directly associated with assets held for sale in the Consolidated balance sheet.

The following table summarizes the results of the combined businesses of Lumileds and Automotive included in the Consolidated statements of income as discontinued operations.

Philips Group
Results of combined Lumileds and Automotive Lighting businesses in millions of EUR
2012 - 2014
 
2012
2013
2014
Sales
1,139
1,268
1,416
Costs and expenses
(1,083)
(1,134)
(1,202)
Income before taxes
56
134
214
Income taxes
33
(1)
(73)
Results from discontinued operations
89
133
141

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Upon disposal, the associated currency translation differences, part of Shareholders’ equity, will be recognized in the Consolidated statement of income. At December 31, 2014, the estimated release amounts to a EUR 24 million gain.

The following table presents the assets and liabilities of the combined Lumileds and Automotive business, as Assets classified as held for sale and Liabilities directly associated with assets classified as held for sale in the Consolidated balance sheet as of 2014.

Philips Group
Assets and liabilities of combined Lumileds and Automotive Lighting businesses in millions of EUR
2014
 
2014
Property, plant and equipment
666
Intangible assets including goodwill
295
Inventories
248
Accounts receivable
278
Other assets
14
Assets classified as held for sale
1,501
Accounts payable
(134)
Provisions
(34)
Other liabilities
(149)
Liabilities directly associated with assets held for sale
(317)

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Non-transferrable balance sheet positions, such as certain accounts receivable, accounts payable, accrued liabilities and provisions are reported on the respective balance sheet captions.

Discontinued operations: Audio, Video, Multimedia and Accessories business

As announced on April 28, 2014, the AVM&A business was divested to Gibson Brands, Inc. The transfer was effected on June 29, 2014 and in December 2014 a final settlement closed the deal.

The following table summarizes the results of the AVM&A business included in the Consolidated statements of income as Discontinued operations.

Philips Group
Results of Audio, Video, Multimedia and Accessories business in millions of EUR
2012 - 2014
 
2012
2013
2014
Sales
1,414
1,189
469
Costs and expenses
(1,295)
(1,180)
(473)
Gain on sale of business
10
Income before taxes
119
9
6
Income taxes
(38)
(3)
12
Investments in associates
(3)
 
 
Results from discontinued operations
78
6
18

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The following table shows the components of the gain on the sale of the AVM&A business.

Philips Group
Gain on the sale of the Audio, Video, Multimedia and Accessories business in millions of EUR
2014
 
2014
Consideration
74
Carrying value of net assets disposed
(61)
Cost of disposal
(3)
Gain on sale of business
10
Income taxes
12
Net gain on sale of business
22

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Assets classified as held for sale amounted to EUR 484 million at moment of disposal (December 31, 2013: EUR 400 million). Liabilities directly associated with the assets held for sale amounted to EUR 423 million at moment of disposal (December 31, 2013: EUR 348 million) in the Consolidated balance sheets.

Discontinued operations: Other

Certain results of other divestments including the Television business formerly reported as discontinued operations are included with a net gain of EUR 31 million in 2014 (2013: a net loss of EUR 1 million; 2012: a net loss of EUR 31 million).

Other assets classified as held for sale

On July 1, 2013, Philips announced to transfer certain assets and cash proceeds from the sale of certain assets to the Dutch pension plan. In total EUR 38 million of related assets are classified as held for sale as of December 31, 2014 (December 31, 2013: EUR 94 million). For more details see note (20) Post-employment benefits.

Assets and liabilities directly associated with assets held for sale relate to property, plant and equipment for an amount of EUR 23 million (December 31, 2013: EUR 13 million) and businesses classified as held for sale amounted to EUR 19 million at December 31, 2014 (December 31, 2013 EUR nil million).

In 2014, property, plant and equipment divested assets classified as held for sale amounted to EUR 17 million with proceeds of EUR 19 million. Other non-current financial assets divested assets classified as held for sale amounted to EUR 76 million with proceeds of EUR 76 million. Businesses divested assets classified as held for sale amounted to EUR 49 million and liabilities directly associated with the assets held for sale amounted to EUR 3 million. The businesses divested had proceeds of EUR 45million.

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