Philips 2006 Annual Report Download - page 140

Philips Annual Report 2006140
Deferred tax assets and liabilities
Deferred tax assets and liabilities relate to the following balance
sheet captions:
2005 2006
assets liabilities assets liabilities
Intangible assets 100 (290 ) 100 (350 )
Property, plant and
equipment 120 (80 ) 90 (60 )
Inventories 170 (30 ) 160 (20 )
Prepaid pension costs 10 (500 ) 10 (590 )
Other receivables 80 (20 ) 70 (20 )
Other assets 340 (80 ) 420 (20 )
Provisions:
Pensions - 260 (10 ) 560 (240 )
Restructuring - 30 − 20 −
Guarantees - 10 − 10 −
Termination benefi ts - 30 − 20 −
Other postretirement
benefi ts
-
120 − 100 −
Other - 550 (80 ) 460 (140 )
Other 210 (68 ) 190 (25 )
Total deferred tax assets/
liabilities 2,030 (1,158 ) 2,210 (1,465 )
Tax loss carryforwards
(including tax credit
carryforwards) 1,743 1,000
Net deferred tax position 2,615 1,745
Valuation allowances (935 ) (721 )
Net deferred tax assets 1,680 1,024
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences
become deductible. Management considers the scheduled reversal
of deferred tax liabilities, projected future taxable income and tax
planning strategies in making this assessment. In order to fully realize
the deferred tax assets arising from net operating losses, the Company
will need to generate future taxable income in the countries where
the net operating losses were incurred. Based upon the level of historical
taxable income and projections for future taxable income over the
periods in which the deferred tax assets are deductible, management
believes, as at December 31, 2006, it is more likely than not that the
Company will realize the benefi ts of these deductible differences, net
of the existing valuation allowance.
The valuation allowance for deferred tax assets as of December 31,
2006 and 2005 was EUR 721 million and EUR 935 million respectively.
The net changes in the total valuation allowance for the years ended
December 31, 2006, 2005 and 2004 were an decrease of EUR 214
million, an increase of EUR 40 million and a decrease of EUR 170
million respectively. The EUR 214 million decrease of the valuation
allowance in 2006, is mainly related to reductions in the tax loss
carry forwards related to tax credits which cannot be recovered.
The portion of the valuation allowance relating to deferred tax assets
for which subsequently recognized tax benefi ts will be allocated to
reduce goodwill or other intangible assets of an acquired entity or
directly to contributed capital, amounts to EUR 5 million
(2005: EUR 39 million).
At December 31, 2006, operating loss carryforwards expire as follows:
Total 2007 2008 2009 2010 2011
2012/
2016 later
un-
limited
3,651 114 8 22 22 24 26 251 3,184
The Company also has tax credit carryforwards of EUR 70 million,
which are available to offset future tax, if any, and which expire as follows:
Total 2007 2008 2009 2010 2011
2012/
2016 later
un-
limited
70 2 1 − − 3 10 16 38
Classifi cation of the deferred tax assets and liabilities is as follows:
2005 2006
Deferred tax assets grouped under other
current assets 482 508
Deferred tax assets grouped under other
non-current assets 1,523 1,144
Deferred tax liabilities grouped under provisions (325 ) (628 )
1,680 1,024
Classifi cation of the income tax payable and receivable is as follows:
2005 2006
Income tax receivable grouped under
current receivables 71 105
Income tax receivable grouped under
non-current receivables 10 25
Income tax payable grouped under
accrued liabilities (524 ) (519 )
Income tax payable grouped under
non-current liabilities (59 ) (36 )
The amount of the unrecognized deferred income tax liability for
temporary differences of EUR 47 million (2005: EUR 118 million)
relates to unremitted earnings in foreign Group companies, which are
considered to be permanently re-invested. Under current Dutch tax
law, no additional taxes are payable. However, in certain jurisdictions,
withholding taxes would be payable.
The tax expense on the gain from the divestment of the Semiconductors
division, as well as the use of tax credits, are under discussion with the
tax authorities.
112 Group fi nancial statements
Notes to the group fi nancial statements
172 IFRS information 218 Company fi nancial statements