Reebok 2006 Annual Report Download - page 178

Consolidated Financial Statements ›
174 ANNUAL REPORT 2006 › adidas Group ›
27 » Financial Expenses, Net
Financial result consists of the following:
Other financial expenses include losses on other financial assets, unrealized losses from
investment funds (unrealized gains in the prior year, which were shown in other financial
income) as well as minority interests, which are not recorded in equity according to IAS 32.
Information regarding the Group’s available-for-sale investments, borrowings and finan-
cial instruments is also included in these Notes (see Notes 7, 14, 16 and 24).
28 » Income Taxes
adidas AG and its German subsidiaries are subject to corporate and trade taxes.
In general, a corporate tax rate of 25% plus a surcharge of 5.5% thereon is applied to
earnings. The municipal trade tax is approximately 15% of taxable income, which is deductible
in the determination of income for corporation tax purposes.
For non-German companies, deferred taxes are calculated based on tax rates that have
been enacted or substantively enacted by the closing date.
Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are offset if they relate to the same fiscal authority. The
following deferred tax assets and liabilities, determined after appropriate offsetting, are pre-
sented on the balance sheet:
The movements of deferred taxes are as follows:
Financial Expenses, Net (Continuing Operations) € in millions
Year ending Dec. 31
2006 2005
Interest income 37 36
Net foreign exchange gain 2 5
Fair value gains on available–for–sale investments 0 0
Other 0 0
Financial income 39 42
Interest expense (184) (74)
Net foreign exchange loss — —
Other (13) (20)
Financial expenses (197) (94)
Financial expenses, net (158) (52)
Deferred Tax Assets/Liabilities € in millions
Dec. 31 Dec. 31
2006 2005
Deferred tax assets 332 195
Deferred tax liabilities (522) (42)
Deferred tax assets, net (190) 153
Movement of Deferred Taxes € in millions
2006 2005
Deferred tax assets, net as at January 1 153 89
Deferred tax (expense)/income 1) (14) 76
Change in consolidated companies 2) (347) (13)
Change in deferred taxes attributable to effective portion of qualifying
hedging instruments recorded in equity (see Note 24) 2 (16)
Currency translation differences 17 12
Change in deferred taxes attributable to actuarial gains and losses
recorded in equity (see Note 19) (1) 5
Deferred tax assets, net as at December 31 (190) 153
1) Includes deferred tax income of € 2 million relating to discontinued operations for the year ending December 31, 2005.
2) Relates to the acquisition of Reebok International Ltd. (USA) and its subsidiaries for the year ending December 31, 2006 (see Note 5)
and to the divestiture of the Salomon business segment for the year ending December 31, 2005.