APC 2003 Annual Report Download - page 87
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85
13.3 - Deferred taxes
(
€
millions)
Dec. 31, 2003 Dec. 31, 2002
Temporary differences – Assets
Tax credits and tax loss carryforwards (note 13.4) 497.3 465.6
Accruals for pensions and other post-retirement benefit
obligations 118.9 231.9
Allowance for doubtful debts and inventory losses 85.1 88.5
Other reserves / accruals 74.4 52.1
Restructuring provision 41.0 16.1
Reserves for impairment of fixed assets 14.2 2.3
Capital losses taxed at reduced rates 9.1 8.6
Others 102.1 78.8
Total deferred tax assets 942.1 943.9
Temporary differences – Liabilities
Tax-driven reserves (75.3) (97.6)
Capital gains taxed at reduced rates (37.4) (46.8)
Others (174.4) (135.5)
Total deferred tax liabilities (287.1) (279.9)
Net deferred tax assets 655.0 664.0
Deferred tax assets recorded in respect of tax loss carryforwards at December 31, 2003 essentially concern
France and other European countries where certain tax losses can be carried forward indefinitely.
13.4 - Tax effect of the loss
incurred on the sale of Legrand
The loss incurred on the sale of Legrand in 2002 gen-
erated tax losses of € 1,617 million. In 2003, a tax
benefit of € 453 million was recorded in the state-
ment of income, corresponding to the recognition of
deferred tax assets on a portion of these losses and
the discounting of these assets based on the
assumption that the loss carryforwards will be utilized
within five years.
In addition, part of the tax losses was carried back in
2003 against prior years’ taxable income. The Group
has applied for a refund of the carryback credit, cor-
responding to tax paid in the period 1999 to 2001.
This carryback credit, in the amount of € 97 million,
has therefore been recorded as an asset and has
reduced by the same amount the deferred taxes
recorded in 2002. The credit will be set off against
current taxes in the years to come and any unused
portion will be refunded by the State in 2006.
The French Finance Act for 2004 allows tax losses
generated in France to be carried forward indefi-
nitely. In light of this change in tax law, in 2003 the
Group recognized a deferred tax asset for the total
loss on the sale of the Legrand shares. The resulting
increase in deferred tax assets amounted to € 114
million. The Group expects to utilize these tax loss
carryforwards over a period of 6 to 10 years, although
the exact timing cannot be reliably determined at this
stage. For this reason, deferred taxes have not been
discounted in 2003 (in 2002, discounting adjustments
amounted to € 53 million).