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Income from operations | 12 Months Ended
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Dec. 31, 2017
Disclosure of income from operations [Abstract] |
Disclosure of income from operations [Text block] | Table of Contents ### Note 6Income from operations For information related to Sales on a segment and geographical basis, see Information by segment and main country. Philips Group Sales and costs by nature in millions of EUR 2015 - 2017
| 2015 | 2016 | 2017
Sales | 16,806 | 17,422 | 17,780
Costs of materials used | ( 5,188) | ( 5,030) | ( 4,918)
Employee benefit expenses | ( 5,638) | ( 5,298) | ( 5,824)
Depreciation and amortization | ( 972) | ( 976) | ( 1,025)
Shipping and handling | ( 547) | ( 545) | ( 602)
Advertising and promotion | ( 862) | ( 915) | ( 939)
Lease expense, net 1 ) | ( 250) | ( 223) | ( 227)
Other operational costs 2 ) | ( 2,751) | ( 2,963) | ( 2,804)
Other business income (expenses) | 60 | ( 6) | 76
Income from operations | 658 | 1,464 | 1,517
1)Lease expense includes EUR 38 million (2016: EUR 30 million, 2015: EUR 33 million) of other costs, such as fuel and electricity, and taxes to be paid and reimbursed to the lessor 2)Other operational costs contain items which are dissimilar in nature and individually insignificant in amount to disclose separately. These costs contain among others expenses for outsourcing services, mainly in IT and HR, 3 rd) party workers, consultants, warranty, patents, costs for travelling, external legal services and EUR 90 million government grants recognized in 2017 (2016: EUR 79 million, 2015: EUR 58 million). The grants mainly relate to research and development activities and business development #### Sales composition Philips Group Sales composition in millions of EUR 2015 - 2017
| 2015 | 2016 | 2017
Goods 1 ) | 13,175 | 13,568 | 13,974
Services 1 ) | 3,215 | 3,478 | 3,477
Royalties | 416 | 375 | 329
Sales | 16,806 | 17,422 | 17,780
1)Prior period amounts have been revised to adjust the presentation of revenue related to certain software solutions as well as discounts related to services rendered in 2016. The amount of EUR 403 million was reclassified from Goods to Services in 2016 (EUR 178 million in 2015). These adjustments did not affect the primary Consolidated financial statements of any of the prior years. #### Costs of materials used Cost of materials used represents the inventory recognized in cost of sales. #### Employee benefit expenses Philips Group Employee benefit expenses in millions of EUR 2015 - 2017
| 2015 | 2016 | 2017
Salaries and wages 1 ) | 4,342 | 4,422 | 4,856
Post-employment benefits costs | 705 | 279 | 347
Other social security and similar charges: |  |  |
Required by law | 480 | 489 | 514
Voluntary | 110 | 108 | 108
Employee benefit expenses | 5,638 | 5,298 | 5,824
1)Salaries and wages includes EUR 122 million (2016: EUR 95 million, 2015 EUR 82 million) of share-based compensation expenses. The employee benefit expenses relate to employees who are working on the payroll of Philips, both with permanent and temporary contracts. For further information on post-employment benefit costs, see Post-employment benefits. For details on the remuneration of the members of the Board of Management and the Supervisory Board, see Information on remuneration. #### Employees The average number of employees by category is summarized as follows: Philips Group Employees in FTEs 2015 - 2017
| 2015 | 2016 | 2017
Production | 26,524 | 27,899 | 27,697
Research and development | 8,242 | 9,087 | 9,787
Other | 23,216 | 24,565 | 26,314
Employees | 57,982 | 61,552 | 63,798
3rd party workers | 7,900 | 8,050 | 8,098
Continuing operations | 65,882 | 69,602 | 71,895
Discontinued operations | 48,330 | 43,971 | 43,497
Philips Group | 114,211 | 113,572 | 115,392
Employees consist of those persons working on the payroll of Philips and whose costs are reflected in the Employee benefit expenses table. 3 rd party workers consist of personnel hired on a per-period basis, via external companies. Philips Group Employees per geographical location in FTEs 2015 - 2017
| 2015 | 2016 | 2017
Netherlands | 7,589 | 11,199 | 11,308
Other countries | 58,292 | 58,403 | 60,587
Continuing operations | 65,882 | 69,602 | 71,895
Discontinued operations | 48,330 | 43,971 | 43,497
Philips Group | 114,211 | 113,572 | 115,392
#### Depreciation and amortization Depreciation of property, plant and equipment and amortization of intangible assets, including impairments, are as follows: Philips Group Depreciation and amortization 1 ) in millions of EUR 2015 - 2017
| 2015 | 2016 | 2017
Depreciation of property, plant and equipment | 422 | 458 | 437
Amortization of software | 35 | 49 | 50
Amortization of other intangible assets | 273 | 244 | 260
Amortization of development costs | 242 | 225 | 277
Depreciation and amortization | 972 | 976 | 1,025
1)Includes impairments Depreciation of property, plant and equipment is primarily included in cost of sales. Amortization of the categories of other intangible assets are reported in selling expenses for brand names and customer relationships and are reported in cost of sales for technology based and other intangible assets. Amortization of development cost is included in research and development expenses. #### Shipping and handling Shipping and handling costs are included in cost of sales and selling expenses in Consolidated statements of income. Further information on when costs are to be reported to cost of sales or selling expenses can be found in Significant accounting policies. #### Advertising and promotion Advertising and promotion costs are included in selling expenses in Consolidated statements of income. #### Audit fees The table below shows the fees attributable to the fiscal years 2015, 2016 and 2017 for services rendered by the respective Group auditors. Philips Group Fees in millions of EUR
| 2015 | 2016 | 2017
Audit fees | 15.3 | 18.4 | 16.7
consolidated financial statements | 9.8 | 13.4 | 12.5
statutory financial statements | 5.5 | 5.0 | 4.2
Audit-related fees | 4.9 | 2.3 | 1.5
acquisitions and divestments | 3.6 | 0.9 | 0.0
sustainability assurance | 0.6 | 0.7 | 0.7
other | 0.7 | 0.7 | 0.8
Tax fees | 1.1 | 0.0 | 0.0
tax compliance services | 1.1 | 0.0 | 0.0
Other fees | 0.0 | 0.0 | 0.0
other | 0.0 | 0.0 | 0.0
Fees 1 ) | 21.3 | 20.7 | 18.3
1)Fees charged by the Dutch organization of the Philips Group auditor were EUR 9.2 million in 2017 #### Other business income (expenses) Other business income (expenses) consists of the following: Philips Group Other business income (expenses) in millions of EUR 2015 - 2017
| 2015 | 2016 | 2017
Result on disposal of businesses: |  |  |
income | 1 | 1 | 15
expense | ( 2) | ( 4) | ( 5)
Result on disposal of fixed assets: |  |  |
income | 44 | 4 | 96
expense | ( 1) | ( 1) | ( 1)
Result on other remaining business: |  |  |
income | 44 | 13 | 41
expense | ( 27) | ( 17) | ( 62)
Impairment of goodwill 1 ) |  | ( 1) | ( 9)
Other business income (expenses) | 60 | ( 6) | 76
Total other business income | 89 | 17 | 152
Total other business expense | ( 30) | ( 23) | ( 76)
1)Further information on goodwill movement can be found in Goodwill The result on disposal of businesses was mainly due to divestment of non-strategic businesses. The result on disposal of fixed assets was mainly due to sale of real estate assets. In 2017 income on disposal of fixed assets amounted to EUR 96 million of which EUR 59 million relates to a disposal of real estate in the US. The result on other remaining businesses mainly relates to non-core revenue and various legal matters.

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