Mail Stop 6010
March 22, 2006
Mr. Pierre-Jean Sivignon
Executive Vice President and Chief Financial Officer
Koninklijke Philips Electronics N.V.
Breitner Center, Amstelplein 2,
1096 BC Amsterdam, The Netherlands
RE: Koninklijke Philips Electronics N.V.
Form 20-F for the fiscal year ended December 31, 2005
File No. 001-05146-01
Dear Mr. Sivignon:
We have reviewed your filings and have the following
comments.
We have limited our review of your filing to those issues we have
addressed in our comments. Where indicated, we think you should
revise your documents in response to these comments. If you
disagree, we will consider your explanation as to why our comment
is
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may
ask
you to provide us with information so we may better understand
your
disclosure. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 20-F for the year ended December 31, 2005
Management`s discussion and analysis, page 68
Liquidity and capital resources, page 93
1. Please revise to describe how cash flows from discontinued
operations are reflected in your cash flows statements. In
addition,
revise to describe how the absence of cash flows or absence of
negative cash flows, related to the discontinued operations will
impact your future liquidity and capital resources.
Consolidated Statements of Income, page 124
2. We note you present "earnings before interest and taxes," which
is
identified as a non-GAAP financial measure in Item 10 of
Regulation
S-K. Please revise to comply with Item 10(e)(1) of Regulation S-
K,
to remove such non-GAAP measures from the face of your income
statement. Refer to Item 10 of Regulation S-K and General
Instruction
C of Form 20-F for guidance.
Consolidated Statements of Cash Flows, page 128
3. We believe your presentation of cash flows related to
discontinued
operations is inconsistent with SFAS 95 because (A) your use of
the
indirect method of determining cash flows from operating
activities
begins with income from continuing operations rather than net
income
as required by SFAS 95, paragraph 28; and (B) you present the
combined operating, investing, and financing cash flows of
discontinued operations as a single amount as supplemental
disclosures rather than classifying discontinued operations cash
flows by activity - operating, investing, and financing - within
the
body of the cash flow statement itself (i.e. not as supplemental
disclosure) as required by SFAS 95, paragraph 26. While we do not
believe your presentation complies with SFAS 95, we will not
object
if you retroactively modify your presentation similar to a change
in
accounting method (without referring to the correction of an
error)
provided that you comply with the following:
* You change your presentation to address the points noted above
and
to comply with SFAS 95.
* You label either the column heading or the marginal heading as
"revised" or "restated." Characterizing the modification as
"reclassified" will not suffice.
* You make specific and prominent footnote disclosure to the
effect
that the company has separately disclosed the operating, investing
and financing portions of the cash flows attributable to
discontinued
operations, which in prior periods were reported on a combined
basis
as a single amount.
* Please ensure that you comply with the requirement in SFAS 95,
paragraph 7 that the total amounts of cash and cash equivalents at
the beginning and end of the period shown in the statement of cash
flows are the same amounts presented as cash and cash equivalents
on
the balance sheets. If the "assets of discontinued operations,"
which you present as a single amount on your balance sheet
includes
cash and cash equivalents, one way you can comply with SFAS 95,
paragraph 7 is to separately quantify on the face of the statement
of
cash flows the portion of each of (A) net decrease in cash and
cash
equivalents; (B) cash and cash equivalents at the beginning of the
period, and (C) cash and cash equivalents at the end of the period
attributable to continuing operations and the portion attributable
to
discontinued operations. The amount of cash and cash equivalents
included within "assets of discontinued operations" on the balance
sheet may be shown parenthetically or as a single line on the
balance
sheet.
4. We note that you present a subtotal "cash flows before
financing
activities" on the face of your statement of cash flows. This
measure appears to be a non-GAAP, pursuant to Item 10(e)(1)(ii) of
Regulation S-K. Please delete the referenced subtotal or tell us
why that subtotal is permissible under the guidance. This comment
also applies to your selected financial data.
Accounting policies, page 140
Accounting for capital transactions of a subsidiary or an
unconsolidated company, page 140
5. We note that dilution gains and losses are presented in the
income
statement under "other business income (expenses)." Please tell us
why it is appropriate to present gains and losses related to
consolidated subsidiary stock transactions within operating
income.
Refer to SAB Topic 5H, Question 6 in your response.
Note 7 - Investments in unconsolidated companies, page 148
6. We note you plan to file an amendment to your Form 20-F to
include
the unaudited financial statements for the year 2005 for LG.
Philips
LCD and LG Philips Displays on or before June 30, 2006. Please
provide us with your calculation of significance to show that
audited
financial statements for the year 2005 are not required for these
investments.
7. In this regard, we note that you are currently investigating
the
requirement relating to the unaudited financial statements of LG.
Philips Displays for 2005. If you conclude 3-09 financial
statements
are not required, please explain why and cite the literature upon
which you relied.
As appropriate, please amend your Form 20-F for the year
ended
December 31, 2005, and respond to these comments within 10
business
days or tell us when you will provide us with a response. You may
wish to provide us with marked copies of the amendment to expedite
our review. Please furnish a cover letter with your amendment
that
keys your responses to our comments and provides any requested
information. Detailed cover letters greatly facilitate our
review.
Please understand that we may have additional comments after
reviewing your responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed decision. Since the company and
its management are in possession of all facts relating to a
company`s
disclosure, they are responsible for the accuracy and adequacy of
the
disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Eric Atallah, Staff Accountant at (202) 551-
3663
or me at (202) 551-3554 regarding comments on the financial
statements and related matters. In this regard, do not hesitate
to
contact, Martin James, Senior Assistant Chief Accountant at (202)
551-3671 with any other questions.
Sincerely,
Angela Crane
Branch Chief
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Mr. Pierre-Jean Sivignon
Koninklijke Philips Electronics N.V.
March 22, 2006
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