Property, plant and equipment
Dec. 31, 2025
Accounting policies
Owned assets
The cost of property, plant and equipment comprise all directly attributable costs (including the cost of
material and direct labor).
Depreciation is generally calculated using the straight-line method over the useful life of the asset. Land and
assets under construction are not depreciated. When assets under construction are ready for their intended
use, they are transferred to the relevant asset category and depreciation starts. All other property, plant and
equipment items are depreciated over their estimated useful lives to their estimated residual values.
The estimated useful lives of property, plant and equipment are:
Philips Group
Useful lives of property, plant and equipment
Buildings | from 5 to 50 years |
Machinery and installations | from 3 to 20 years |
Other equipment | from 1 to 10 years |
Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances
indicate that the book value of the assets concerned may not be recoverable. An impairment loss is
recognized for the amount by which the asset's book value exceeds their recoverable amount. Impairments
are reversed if and to the extent that the impairment no longer exists. The recoverable amount is defined as
the higher of the asset’s fair value less costs of disposal and its value in use.
Gains and losses on the sale of property, plant and equipment are included in other business income. Costs
related to repair and maintenance activities are expensed in the period in which they are incurred unless they
extend the asset's original lifetime or capacity.
Right-of-use assets
The company leases various items of real estate, vehicles and other equipment. The company determines
whether an arrangement constitutes or contains a lease based on the substance of the arrangement at the
lease inception. The arrangement constitutes or contains a lease if fulfillment is dependent on the use of a
specific asset and the arrangement conveys a right to use the asset, even if that asset is not explicitly specified
in the arrangement.
Company as a lessee
The company recognizes right-of-use assets and lease liabilities for leases with a term of more than 12 months
if the underlying asset is not of low value. Payments for short-term and low-value leases are expensed over
the lease term. Extension options are included in the lease term if their exercise is reasonably certain. Right-of-
use assets are measured at cost less accumulated depreciation and impairment losses, adjusted for any
remeasurements. Right-of-use assets are depreciated using the straight-line method over the shorter of the
lease term and the useful life of the underlying assets.
Company as a lessor
When the company acts as a lessor, it determines at lease inception whether a lease is a finance lease or an
operating lease. Leases in which the company does not transfer substantially all the risks and rewards
incidental to ownership of an asset are classified as operating leases. The company recognizes lease payments
received under operating leases as income on a straight-line basis over the lease term in the Consolidated
statement of income.
Accounting estimates and judgments
Impairment of owned and right-of-use assets
Judgments are required, not only to determine whether there is an indication that an asset may be impaired,
but also whether indications exist that impairment losses previously recognized may no longer exist or may
have decreased (impairment reversal). After indications of impairment have been identified, estimates and
assumptions are used in the determination of the recoverable amount of a fixed asset. These involve estimates
of expected future cash flows (based on future growth rates and remaining useful life) and residual value
assumptions, as well as discount rates to calculate the present value of the future cash flows.
Owned assets
Estimates are required to determine the (remaining) useful lives of fixed assets. Useful lives are determined
based on an asset's age, the frequency of its use, repair and maintenance policy, technology changes in
production and expected restructuring. The company estimates the expected residual value per asset item.
The residual value is the higher of the asset's expected sales price (based on recent market transactions of
similar sold items) and its material scrap value.
Right-of-use assets
Judgment is required to determine the lease term. The assessment of whether the company is reasonably
certain to exercise extension options impacts the lease term, which could affect the amount of lease liabilities
and right-of-use assets recognized.
Property, plant and equipment are fixed assets that are owned or right-of-use assets under a lease agreement.
Owned and right-of-use assets are held for use in Philips' operating activities.
Philips Group
Property, plant and equipment in millions of EUR
2025 | 2024 | |
Owned assets | 1,465 | 1,565 |
Right-of-use assets | 752 | 886 |
Total | 2,217 | 2,452 |
Leasing activities
The company leases equipment to customers under operating lease arrangements. These leases primarily
relate to the Diagnosis & Treatment and Connected Care segments. At December 31, 2025, the net book value
of assets subject to operating leases amounted to EUR 143 million (2024: EUR 135 million), which includes
additions of EUR 135 million recognized during 2025 (2024: EUR 131 million) and depreciation of EUR 96
million recognized during 2025 (2024: EUR 103 million).
The company leases various items of real estate, vehicles and other equipment where it acts as a lessee. The
company has multiple extension and termination options in a number of lease contracts. These are used to
maximize operational flexibility in terms of managing the assets used in the company's operations. The
options considered reasonably certain are part of lease liabilities. The company has no commitments to any
leases not yet commenced in 2025 (2024: EUR 0 million). The company's lease contracts do not contain
financial covenants.
The company enters into sale-and-leaseback transactions primarily for its Sleep & Respiratory Care Business.
These transactions are accounted for at market value. The payments for these leases are considered in
determining lease liabilities. Principal repayments are part of cash flows used for financing activities and
interest payments are part of cash flows used for operating activities. The cash inflows arising from the sales
transactions are part of cash flows provided by financing activities. Lease payments under sale-and-leaseback
arrangements for 2025 were EUR 29 million (2024: EUR 43 million). The remaining minimum payment under
sale-and-leaseback arrangements included in lease obligations above are:
Philips Group
Remaining minimum payments under sale-and-leaseback arrangements in millions of EUR
2026 | 30 |
2027 | 24 |
2028 | 17 |
2029 | 13 |
2030 | 5 |
Thereafter | - |
Further lease disclosures as lessee can be found in Income from operations, Financial income and expenses,
Cash flow statement supplementary information and Debt. For disclosures for lease receivables refer to
Philips Group
Property, plant and equipment in millions of EUR
Owned assets | Right-of-use assets | Property, plant and equipment | |||||||||
Land and buildings | Machinery and installations | Other equipment | Assets under construction | Total | Land and buildings | Other equipment | Total | Total | |||
Balance as of January 1, 2024 | |||||||||||
Cost | 1,114 | 1,731 | 1,404 | 274 | 4,521 | 1,425 | 216 | 1,641 | 6,162 | ||
Accumulated depreciation | (638) | (1,278) | (1,041) | - | (2,957) | (619) | (104) | (722) | (3,679) | ||
Book value | 476 | 453 | 363 | 274 | 1,565 | 806 | 113 | 919 | 2,483 | ||
Additions | 2 | 134 | 76 | 236 | 448 | 101 | 87 | 189 | 637 | ||
Assets available for use | 12 | 70 | 140 | (248) | (26) | 26 | - | 26 | - | ||
Depreciation | (49) | (191) | (166) | - | (406) | (146) | (56) | (202) | (608) | ||
Impairments | (14) | (23) | (28) | - | (65) | (23) | - | (23) | (89) | ||
Reclassifications | 7 | (6) | 8 | (1) | 8 | (9) | (3) | (12) | (4) | ||
Translation differences and other | 20 | 2 | 9 | 10 | 41 | (6) | (4) | (10) | 31 | ||
Total change | (22) | (13) | 38 | (3) | 1 | (57) | 24 | (33) | (32) | ||
Balance as of December 31, 2024 | |||||||||||
Cost | 1,151 | 1,790 | 1,527 | 271 | 4,738 | 1,462 | 241 | 1,702 | 6,441 | ||
Accumulated depreciation | (697) | (1,350) | (1,126) | - | (3,173) | (712) | (104) | (816) | (3,989) | ||
Book value | 454 | 440 | 401 | 271 | 1,565 | 749 | 137 | 886 | 2,452 | ||
Additions | 1 | 148 | 41 | 271 | 461 | 25 | 78 | 103 | 564 | ||
Assets available for use | 42 | 69 | 127 | (239) | (1) | 1 | - | 1 | - | ||
Depreciation | (44) | (174) | (155) | - | (373) | (132) | (58) | (190) | (563) | ||
Impairments | (1) | (17) | (14) | - | (33) | (7) | - | (7) | (39) | ||
Divestments and transfers to assets classified as held for sale | (1) | - | (2) | (2) | (5) | (1) | - | (1) | (6) | ||
Reclassifications | 5 | (5) | (15) | (3) | (18) | - | - | - | (18) | ||
Translation differences and other | (28) | (52) | (28) | (23) | (132) | (28) | (13) | (41) | (173) | ||
Total change | (26) | (31) | (46) | 3 | (100) | (142) | 8 | (134) | (235) | ||
Balance as of December 31, 2025 | |||||||||||
Cost | 1,105 | 1,550 | 1,411 | 274 | 4,340 | 1,328 | 255 | 1,583 | 5,923 | ||
Accumulated depreciation | (677) | (1,142) | (1,055) | - | (2,875) | (721) | (110) | (831) | (3,706) | ||
Book value | 428 | 408 | 355 | 274 | 1,465 | 607 | 145 | 752 | 2,217 | ||