Fair value of financial assets and liabilities

The estimated fair value of financial instruments has been determined by the Company using available market information and appropriate valuation methods. The estimates presented are not necessarily indicative of the amounts that will ultimately be realized by the Company upon maturity or disposal. The use of different market assumptions and/or estimation methods may have a material effect on the estimated fair value amounts.

The following methods and assumptions were used to estimate the fair value of financial instruments:

Cash and cash equivalents, accounts receivable - current and accounts payable

The carrying amounts approximate fair value because of the short maturity of these instruments.

Other financial assets

For other financial assets, fair value is based upon the estimated market prices.

Accounts receivable – non-current

The fair value is estimated on the basis of discounted cash flow analyses.

Debt

The fair value is estimated on the basis of the quoted market prices for certain issues, or on the basis of discounted cash flow analyses based upon market rates plus Philips' spread for the particular tenors of the borrowing arrangements. Accrued interest is included under accounts payable and not within the carrying amount or estimated fair value of debt. At December 31, 2008, accrued interest expenses were EUR 79 million (2007: EUR 110 million). The accrued interest on bonds, which is the main part of the accrual, was EUR 70 million (2007: EUR 99 million).