Mercedes 2004 Annual Report Download - page 133

The Group did not provide income taxes or non-German withhold-
ing taxes on €9,626 million (2003: €7,891 million) in cumulative
earnings of non-German subsidiaries because the earnings are
intended to be indefinitely reinvested in those operations. It is
not practicable to estimate the amount of unrecognized deferred
tax liabilities for these undistributed foreign earnings.
In 2004, the U.S. government enacted the American Jobs Creation
Act of 2004 (“Act”), that provides for a special one-time tax
deduction of 85 percent of certain earnings of non-U.S. subsidiaries
that are repatriated to the U.S., provided certain criteria are met.
DaimlerChrysler North America Holding Corporation (“DCNAH”), a
wholly-owned U.S. subsidiary of DaimlerChrysler, is analyzing
the provisions of the Act and the feasibility of several alternative
scenarios for the potential repatriation of a portion of the earnings
of DCNAH’s non-U.S. subsidiaries. Completion of the evaluation
is subject to the attainment of clarifying guidance and legislative
technical corrections of key elements of the repatriation provisions
of the Act. The evaluation is expected to be completed within a
reasonable period of time following the publication of the additional
clarifying language and enactment into law of needed technical
corrections. The range of reasonably possible amounts being
considered for repatriation to the U.S., is zero to $2.7 billion. The
related potential income tax expense ranges from zero to $0.2
billion.
Including the items charged or credited directly to related com-
ponents of stockholders’ equity and the expense (benefit) of dis-
continued operations and from changes in accounting principles,
the expense (benefit) for income taxes consists of the following:
In 2004, tax benefits of €2 million (2003: €105 million) from the
reversal of deferred tax asset valuation allowances at sub-
sidiaries of MMC were recorded as a reduction of the investor
level goodwill relating to the Group’s investment in MMC.
129
10. Discontinued Operations
The results of MTU Aero Engines and the gain on sale are report-
ed as discontinued operations and the Group’s consolidated
financial statements for all prior periods have been adjusted to
reflect this presentation. However, for segment reporting purpos-
es, the revenues and operating profit of MTU Aero Engines is
included in the Other Activities segment revenues and operating
profit in 2003 and 2002 (see Notes 4 and 35).
The operating results of the discontinued operations are as
follows:
11. Cumulative Effects of Changes in Accounting Principles
Variable Interest Entities. DaimlerChrysler adopted the provi-
sions of FIN 46R pertaining to the consolidation of variable inter-
est entities that are special purpose entities as of December 31,
2003, and to all other entities as of March 31, 2004 (see Note 3).
The cumulative effect of adopting FIN 46R was a reduction of
net income of €30 million, net of taxes of €35 million (€0.03 per
share), recognized in the consolidated statement of income
(loss) in 2003.
Goodwill and Other Intangible Assets. DaimlerChrysler
adopted SFAS 142, “Goodwill and Other Intangible Assets” on
January 1, 2002. The after-tax transitional goodwill impairment
charge recognized in the consolidated statement of income
(loss) in 2002 by DaimlerChrysler was €159 million (€0.16 per
share), which represents the Group’s proportionate share of the
transitional goodwill impairment charges from equity method
investees, primarily EADS (see Note 12).
(in millions of €)
2002
2004 2003
1,177
–
–
(754)
(9)
414
979
202
(35)
1,055
–
2,201
1,115
62
–
(2,699)
–
(1,522)
Expense for income taxes of continuing
operations
Expense for income taxes of discontinued
operations
Income tax benefit from changes in accounting
principles
Stockholders’ equity for items in accumulated
other comprehensive loss
Stockholders’ equity for U.S. employee stock
option expense in excess of amounts
recognized for financial purposes
Year ended December 31,
(in millions of €)
20022003
1,933
67
(53)
–
14
2,215
143
(62)
1
82
Revenues
Income before income taxes
Income taxes
Minority interests
Earnings from discontinued operations
Year ended December 31,