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Income from operations | 12 Months Ended
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Dec. 31, 2020
Income from operations [Abstract] |
Income from operations [Text Block] | ### 7Income 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
| 2018 | 2019 | 2020
--- | --- | --- | ---
Sales | 18,121 | 19,482 | 19,535
Costs of materials used | (4,826) | (5,321) | (5,240)
Employee benefit expenses | (5,827) | (6,307) | (6,490)
Depreciation and amortization1) | (1,089) | (1,402) | (1,520)
Shipping and handling | (605) | (636) | (689)
Advertising and promotion | (937) | (972) | (920)
Lease expense2)3)3) | (225) | (52) | (36)
Other operational costs4) | (2,947) | (3,114) | (3,047)
Other business income (expenses) | 55 | (34) | (50)
Income from operations | 1,719 | 1,644 | 1,542
1)Includes impairments; for impairment values please refer to Property, plant and equipment and Intangible assets excluding goodwill 2)For 2020 Lease expense relating to short-term and low value leases amounts to EUR 36 million (2019: EUR 52 million).3)Lease expense includes other costs, such as fuel and electricity, and taxes to be paid and reimbursed to the lessor for 2018: EUR 32 million.4)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, 3rd party workers, consultants, warranty, patents, costs for travelling, external legal services and EUR 107 million government grants recognized in 2020 (2019:EUR 94 million 2018: EUR 81 million). The grants mainly relate to research and development activities and business development. #### Sales composition and disaggregation Philips Group Sales composition in millions of EUR
| 2018 | 2019 | 2020
--- | --- | --- | ---
Goods | 13,973 | 14,810 | 14,698
Services | 3,325 | 3,811 | 4,058
Royalties | 402 | 381 | 317
Total sales from contracts with customers | 17,700 | 19,003 | 19,073
Other sources1) | 421 | 479 | 462
Sales | 18,121 | 19,482 | 19,535
1)Other sources mainly relates to leases, including sublease income from right-of-use assets and related services of EUR 325 million (2019: EUR 307 million) At December 31, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations from a sale of goods and services was EUR 12,193 million. The company expects to recognize approximately 48% of the remaining performance obligations within 1 year. Revenue expected to be recognized beyond 1 year is mostly related to longer term customer service and software contracts. Philips Group Disaggregation of Sales per segment in millions of EUR
| 2020
--- | ---
| Sales at a point in time | Sales over time | Total sales from contracts with customers | Sales from other sources1) | Total sales2)
Diagnosis & Treatment | 5,132 | 2,998 | 8,129 | 46 | 8,175
Connected Care | 4,204 | 944 | 5,147 | 417 | 5,564
Personal Health | 5,396 | 11 | 5,407 | - | 5,407
Other | 61 | 327 | 389 | - | 389
Philips Group | 14,793 | 4,279 | 19,073 | 462 | 19,535
1)Other sources mainly relates to leases, including sublease income from right-of-use assets and related services of EUR 325 million.2)Represents revenue from external customers as required by IFRS 8 Operating Segments. Philips Group Disaggregation of Sales per segment in millions of EUR
| 2018 |  | 2019
--- | --- | --- | ---
| Total sales |  | Sales at a point in time | Sales over time | Total sales from contracts with customers | Sales from other sources1) | Total sales2)
Diagnosis & Treatment | 7,726 |  | 5,428 | 2,988 | 8,417 | 68 | 8,485
Connected Care | 4,341 |  | 3,545 | 718 | 4,263 | 411 | 4,674
Personal Health | 5,524 |  | 5,848 | 6 | 5,854 | - | 5,854
Other | 530 |  | 162 | 308 | 469 | - | 469
Philips Group | 18,121 |  | 14,982 | 4,021 | 19,003 | 479 | 19,482
1)Other sources mainly relates to leases, including sublease income from right-of-use assets and related services of EUR 307 million 2)Represents revenue from external customers as required by IFRS 8 Operating Segments. Philips Group Disaggregation of Sales per geographical cluster in millions of EUR
| 2020
--- | ---
| Sales at a point in time | Sales over time | Total sales from contracts with customers | Sales from other sources1) | Total sales2)
Western Europe | 3,663 | 931 | 4,594 | 19 | 4,613
North America | 4,712 | 2,140 | 6,853 | 95 | 6,949
Other mature geographies | 1,145 | 373 | 1,518 | 342 | 1,860
Total mature geographies | 9,520 | 3,444 | 12,965 | 457 | 13,422
Growth geographies | 5,273 | 835 | 6,108 | 5 | 6,113
Sales | 14,793 | 4,279 | 19,073 | 462 | 19,535
1)Other sources mainly relates to leases, including sublease income from right-of-use assets and related services of EUR 325 million.2)Represents revenue from external customers as required by IFRS 8 Operating Segments. Philips Group Disaggregation of Sales per geographical cluster in millions of EUR
| 2018 |  | 2019
--- | --- | --- | ---
| Total sales |  | Sales at a point in time | Sales over time | Total sales from contracts with customers | Sales from other sources1) | Total sales2)
Western Europe | 3,990 |  | 3,165 | 931 | 4,096 | 38 | 4,134
North America | 6,338 |  | 4,944 | 1,894 | 6,837 | 114 | 6,951
Other mature geographies | 1,892 |  | 1,226 | 357 | 1,583 | 322 | 1,905
Total mature geographies | 12,221 |  | 9,335 | 3,181 | 12,515 | 474 | 12,990
Growth geographies | 5,901 |  | 5,647 | 840 | 6,488 | 5 | 6,492
Sales | 18,121 |  | 14,982 | 4,021 | 19,003 | 479 | 19,482
1)Other sources mainly relates to leases, including sublease income from right-of-use assets and related services of EUR 307 million 2)Represents revenue from external customers as required by IFRS 8 Operating Segments. #### 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
| 2018 | 2019 | 2020
--- | --- | --- | ---
Salaries and wages1) | 4,849 | 5,251 | 5,372
Post-employment benefits costs | 351 | 379 | 427
Other social security and similar charges: |  |  |
Required by law | 524 | 564 | 580
Voluntary | 103 | 112 | 112
Employee benefit expenses | 5,827 | 6,307 | 6,490
1)Salaries and wages includes EUR 121 million (2019: EUR 105 million, 2018: EUR 102 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
| 2018 | 2019 | 2020
--- | --- | --- | ---
Production | 30,774 | 35,640 | 39,770
Research & development | 10,700 | 12,287 | 11,129
Other | 26,175 | 24,301 | 24,110
Employees | 67,649 | 72,228 | 75,009
3rd party workers | 7,239 | 6,164 | 5,522
Philips Group | 74,888 | 78,392 | 80,531
Employees consist of those persons working on the payroll of Philips and whose costs are reflected in the Employee benefit expenses table. 3rd party workers consist of personnel hired on a per-period basis, via external companies. Philips Group Employees per geographical location in FTEs
| 2018 | 2019 | 2020
--- | --- | --- | ---
Netherlands | 11,427 | 11,679 | 11,585
Other countries | 63,460 | 66,713 | 68,946
Philips Group | 74,888 | 78,392 | 80,531
#### Depreciation and amortization Depreciation of property, plant and equipment and amortization of intangible assets, including impairments, are as follows: Philips Group Depreciation and amortization1) in millions of EUR
| 2018 | 2019 | 2020
--- | --- | --- | ---
Depreciation of property, plant and equipment | 438 | 645 | 726
Amortization of software | 64 | 75 | 86
Amortization of other intangible assets | 347 | 350 | 381
Amortization of development costs | 240 | 332 | 328
Depreciation and amortization | 1,089 | 1,402 | 1,520
1)Includes impairments; for impairment values please refer to Property, plant and equipment and Intangible assets excluding goodwill 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 2018, 2019 and 2020 for services rendered by the respective Group auditors. Philips Group Agreed fees in millions of EUR
| 2018 | 2019 | 2020
--- | --- | --- | ---
| EY NL1) | EY Network | Total | EY NL1) | EY Network | Total | EY NL1) | EY Network | Total
Audit fees | 7.2 | 5.0 | 12.2 | 8.4 | 6.2 | 14.6 | 8.8 | 5.6 | 14.4
consolidated financial statements | 7.2 | 2.4 | 9.6 | 8.4 | 3.4 | 11.8 | 8.8 | 2.9 | 11.7
statutory financial statements |  | 2.6 | 2.6 |  | 2.8 | 2.8 |  | 2.7 | 2.7
Audit-related fees2) | 0.6 | 0.4 | 1.0 | 0.5 | 0.3 | 0.8 | 2.0 | 0.5 | 2.5
divestment |  |  |  |  |  |  | 1.4 | 0.2 | 1.6
sustainability assurance | 0.4 |  | 0.4 | 0.4 |  | 0.4 | 0.5 |  | 0.5
other | 0.2 | 0.4 | 0.6 | 0.1 | 0.3 | 0.4 | 0.1 | 0.3 | 0.4
Fees | 7.8 | 5.4 | 13.2 | 8.9 | 6.5 | 15.4 | 10.8 | 6.1 | 16.9
1)Ernst & Young Accountants LLP 2)Also known as Assurance fees #### Other business income (expenses) Other business income (expenses) consists of the following: Philips Group Other business income (expenses) in millions of EUR
| 2018 | 2019 | 2020
--- | --- | --- | ---
Result on disposal of businesses: |  |  |
income | 45 | 69 | -
expense | - | (2) | -
Result on disposal of fixed assets: |  |  |
income | 20 | 5 | 2
expense | (1) | - | -
Result on other remaining businesses: |  |  |
income | 23 | 81 | 121
expense | (32) | (88) | (30)
Impairment of goodwill |  | (97) | (144)
Other business income (expense) | 55 | (34) | (50)
Total other business income | 88 | 155 | 123
Total other business expense | (33) | (188) | (173)
The result on disposal of businesses was mainly due to divestment of non-strategic businesses. For more information, please refer to Acquisitions and divestments. The result on disposal of fixed assets was mainly due to the sale of real estate assets. The result on other remaining businesses mainly relates to revaluation of contingent consideration, non-core revenue and various legal matters. In 2020 revisions to EPD's forecast due to delays in commercialization caused by the need to do more work on the maturity of the technology resulted in a EUR 101 million decrease in the fair value of the respective contingent consideration liability and is reflected in Other business income. For more details on the contingent consideration updates, please refer to Provisions. Impairment of goodwill is disclosed in detail in the goodwill section, please refer to Goodwill.

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