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61 TomTom Annual Report 2006Notes to the Financial Statements of TomTom NV
Other provision
The Group formed a provision for potential legal and tax
risks in various jurisdictions. The legal matters mainly
consist of intellectual property infringement issues.
In the normal course of business the Group receives
claims relating to allegations that TomTom has infringed
intellectual property assets and the companies making
the claims seek payments which may take the form of
licences and/or damages. Some of these claims may be
resisted, some are likely to be settled by negotiation and
others are expected to result in litigation.
The cases and claims against the Group often raise difficult
and complex factual and legal issues which are subject to
many uncertainties and complexities, including but not
limited to the facts and circumstances of each particular
case and claim, the jurisdiction in which each
suit is brought and the differences in applicable law. In the
normal course of business, management consults with
legal counsel and certain other experts on matters related
to litigation. The Group accrues a liability when it is
determined that an adverse outcome is more likely
than not and the amount of the loss can be reasonably
estimated. If either the likelihood of an adverse outcome
is reasonably possible or an estimate is not determinable,
the matter is disclosed provided it is material. The directors
are of the opinion that the provision is adequate to resolve
these claims.
The methodology used to determine the level of liability
requires significant judgements and estimates regarding
the costs of settling asserted claims. Due to the fact that
there is limited historical data available the estimated
liability cannot be based upon recent settlement
experience for similar types of claims.
2006 2005
(in thousands)
Non-current 9,682 9,777
Current134,103 11,204
Total 43,785 20,981
1The warranty provision is classified as a current liability.
20. Deferred income tax
As at 31 December 2006 the Group had an estimated
deferred tax liability of 1.0 million (2005: 0.8 million).
A deferred tax asset has been recorded amounting
to 12.1 million (2005: 1.3 million). The deferred tax asset
and tax liability result from timing differences between the
tax and accounting treatment of granted share options,
amortisation of intangible assets and several provisions.
2006 2005
(in thousands)
Deferred tax assets:
To be recovered after more than 12 months 6,927 1,307
To be recovered within 12 months 5,134
12,061 1,307
Deferred tax liabilities:
To be recovered after more than 12 months 86 287
To be recovered within 12 months 876 469
962 756
The movement of the deferred tax assets is as follows:
Stock Intangible Provisions Total
compensation assets
expense
(in thousands)
Balance as at
31 December 2004
Charged to income 1,011 296 1,307
Balance as at
31 December 2005 1,011 296 1,307
Charged to income 5,361 555 4,838 10,754
Balance as at
31 December 2006 6,372 555 5,134 12,061
A deferred tax asset is recognised for the stock
compensation expense related to the share option
plan 2005.
Notes to the Financial Statements of TomTom NV
Continued