Volvo 2007 Annual Report Download - page 105
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Please find page 105 of the 2007 Volvo annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report. Financial information 2007 101
Note 12 Income taxes
Income taxes were distributed as follows:
2006 2007
Current taxes relating to the period (4,559) (5,203)
Adjustment of current taxes for prior periods 176 (20)
Deferred taxes originated or reversed during
the period (2,116) (1,548)
Recognition and derecognition of
deferred tax assets 2,518 242
Total income taxes (3,981) (6,529)
Provisions have been made for estimated tax charges that may arise
as a result of prior tax audits in the Volvo Group. Volvo evaluates tax
processes on a regular basis and makes provisions for possible out-
come when it is probable that Vovo will have to pay more taxes and
when it is possible to make a reasonably assessment of the possible
outcome. Tax claims for which no provision has been deemed neces-
sary were reported as contingent liabilities.
Deferred taxes relate to income taxes payable or recoverable in
future periods in respect of taxable temporary differences, deductible
temporary differences, unused tax loss carryforwards or unused tax
credit carryforwards. Deferred tax assets are recognized to the extent
that it is probable that the amount can be utilized against future tax-
able income. At December 31, 2007, the valuation allowance attribut-
able to deductible temporary differences, unused tax loss carryfor-
wards and unused tax credit carryforwards for which no deferred tax
asset was recognized amounted to 156 (213).
Deferred taxes of 70 (265) have at December 31, 2007, been
accounted for as a direct reduction of equity. It is related to fair value
of derivative instruments.
At year-end 2007, the Group had unused tax loss carryforwards of
about 3,900 (5,900). These loss carryforwards expire according to
the adjoining table.
Due date 2006 2007
Within 1 year 500 500
Within 2 years 100 200
Within 3 years 100 0
Within 4 years 0 100
Within 5 years 200 100
After 6 years 5,000 3,000
Total 5,900 3,900
The Swedish corporate income tax rate is 28%. The table below
shows the principal reasons for the difference between this rate and
the Group’s tax rate, based on income after fi nancial items.
2006, % 2007, %
Swedish corporate income tax rates 28 28
Difference in tax rate in various countries 2 4
Capital gains 0 0
Other non-taxable income (1) (2)
Other non-deductible expenses 4 1
Adjustment of current taxes for prior years (1) (1)
Recognition and derecognition
of deferred tax assets (12) (1)
Other, net 0 1
Income tax rate for the Group 20 30
Reversal of reserve for deferred tax receivables
During the third quarter 2006, AB Volvo decided to reverse a valu-
ation reserve for deferred tax receivables in the Mack Trucks subsidi-
ary. The decision was based on the fact that Volvo assesses that the
company has a long-term higher profi tability. Reporting of the deferred
tax receivables reduced tax expenses in the income statement in the
third quarter by 2,048. In accordance with prevailing accounting rules,
Volvo adjusted goodwill by 1,712, which affected operating income
adversely. The combined earnings effect for the third quarter 2006
was a positive 336.