Adidas 2000 Annual Report Download - page 89

adidas-Salomon ANNUAL REPORT 2000
85
Notes to Consolidated Financial Statements
24. Income Taxes
In general, adidas-Salomon AG and its German subsidiaries are
subject to corporate tax and trade tax.
For undistributed earnings, a corporate tax rate of 40% (1999:
40%) plus a surcharge of 5.5% (1999: 5.5%) thereon is applied.
Upon distribution of domestic earnings, which had been subject
to corporate tax at 40%, 10 percentage points of corporate
tax and the attributable surcharge thereon are refunded to the
Company. Shareholders who are subject to German income tax
are further entitled to a tax credit of the remaining 30 percentage
points of corporate income tax paid by adidas-Salomon AG.
The municipal trade tax is approximately 15% of taxable income,
and is deductible in the determination of income for corporation
tax purposes.
Until December 31, 1999 the Company’s deferred tax assets
and liabilities related to its German operations were measured
at a tax rate determined on the basis of the reduced corporate
tax rate for distributed earnings. The Company recognized
also a deferred tax asset for a corporate income tax refund
receivable upon distribution of dividends pursuant to recom-
mendations of German professional bodies on the application
of IAS 12 (revised 1996).
As part of the German tax reform, the corporate tax credit and
split tax rate system are abolished effective January 1, 2001.
The German corporate tax rate will be reduced to 25%.
A transition rule is in place for 2001, which allows the application
of the corporate tax credit system on the level of the domestic
shareholder for the last time for dividends paid for fiscal 2000.
Earnings which are eligible for a corporate tax credit will be fully
distributed by adidas-Salomon AG in 2001.
As at December 31, 2000 the Company uses a blended tax
rate of 37% for the measurement of future trade and corporate
tax (incl. a surcharge of 5.5%) consequences of temporary
differences related to its German operations.
Deferred taxes of the Company are attributable to the items
detailed in the table below:
(euros in thousands) Dec. 31 Dec. 31
2000 1999
Non current assets 9,577 14,540
Current assets 70,889 90,431
Accrued liabilities and provisions 61,649 72,092
Future benefit from
dividend distributions 0 6,033
Accumulated tax loss carryforwards 113,022 71,545
Deferred tax assets 255,137 254,641
Valuation allowances (101,156) (87,293)
Non current assets 18,787 15,278
Current assets 8,752 5,737
Untaxed reserves 26,225 17,306
Accrued liabilities and provisions 902 6,572
Deferred tax liabilities 54,666 44,893
Deferred tax assets, net 99,315 122,455
Deferred tax assets are recognized only to the extent that the
realization of the related benefit is probable. Based on the past
performance and the prospects of the business for the fore-
seeable future, valuation allowances are established where this
criterion is not met.