Adidas 2000 Annual Report Download - page 90

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86
Valuation allowances refer to deferred tax assets of companies
which are operating in the start-up phase or certain emerging
markets, since the realization of the related tax benefits is not
probable. Further, adidas Salomon North America Inc. has tax
loss carryforwards, which can in part only be utilized in limited
annual amounts through to 2007, for which a valuation allowance
is established for amounts in excess of income projections.
Deferred tax assets and liabilities are offset if they relate to the
same fiscal authority. Hence they are presented on the balance
sheet as follows:
(euros in thousands) Dec. 31 Dec. 31
2000 1999
Deferred tax assets 131,063 134,349
Deferred tax liabilities (31,748) (11,894)
Deferred tax assets, net 99,315 122,455
Tax expense is split as follows:
(euros in thousands) 2000 1999
Current tax expense 112,726 159,034
Deferred tax expense 26,884 (6,070)
Income tax expense 139,610 152,964
The reconciliation of the effective tax rate of adidas-Salomon
to
the German corporate tax rate of 40% is as follows:
2000 1999
(euros in (in %) (euros in (in %)
millions) millions)
Expected income
tax expense 138.6 40.0 159.3 40.0
Tax rate differential (39.0) (11.3) (38.6) (9.7)
Non deductible
goodwill amortization 15.7 4.6 15.6 3.9
Other non deductible
expenses 17.3 5.0 14.6 3.7
Change in tax rates (0.7) (0.2) – –
Losses for which benefits
were not recognizable
and changes in valuation
allowances 0.3 0.1 (1.9) (0.5)
Other, net 2.2 0.6 1.8 0.5
134.4 38.8 150.8 37.9
Withholding tax expense 5.2 1.5 2.2 0.5
Income tax expense 139.6 40.3 153.0 38.4
The Company does not recognize deferred tax liabilities for
unremitted earnings of non-German subsidiaries, which are
expected to be permanently invested in international operations.
The earnings could become subject to additional tax if they
were remitted as dividends, or if foreign earnings were loaned
to the Company, or if the Company should sell its shareholdings
in the subsidiaries.
The Company estimates that the distribution of these earnings
would result in c 17 million and c 14 million of additional with-
holding taxes as at December 31, 2000 and 1999, respectively.