Volvo 2012 Annual Report Download - page 120

The Volvo Group recognizes valuation allowances for deferred tax assets
where management does not expect such assets to be realized based
upon current forecasts. In the event that actual results differ from these
estimates or adjustments are made to future periods in these estimates,
changes in the valuation allowance may be required, which could materi-
ally impact the financial position and the income for the period. As of
December 31, 2012, the valuation allowance amounted to 191 (263) of
the value of deferred tax assets. Most of the reserve consists of unused
loss carryforwards. Net of this valuation allowance, deferred tax assets of
18,386 (18,552) were recognized in the Volvo Group’s balance sheet.
The Volvo Group has significant tax-loss carryforwards that are related
to countries with long or indefinite periods of utilization, mainly Sweden,
Japan and France. The Volvo Group considers it to be most certain that
sufficient income will be generated in the coming years for the tax-loss
carryforwards to be utilized.
Income tax for the period includes current and deferred taxes. Current
taxes are calculated on the basis of the tax regulations prevailing in the
countries in which the Parent Company and subsidiaries are active and
generate taxable income.
Deferred taxes are recognized on differences that arise between the
taxable value and recognized value of assets and liabilities as well as on
tax-loss carryforwards. However, with regard to the measurement of
deferred tax assets, that is, the value of future tax reductions, these items
are recognized provided that it is probable that the amounts can be uti-
lized against future taxable income.
Deferred taxes on temporary differences on participations in subsidiar-
ies and associated companies are only recognized when it is probable
that the difference will be recovered in the near future.
Tax laws in Sweden and certain other countries allow companies to
defer payment of taxes through allocations to untaxed reserves. These
items are treated as temporary differences in the consolidated balance
sheet, meaning that deferred tax liability and equity capital are separated.
In the consolidated income statement an allocation to, or withdrawal from,
untaxed reserves is divided between deferred taxes and net income for
the year.
Income taxes were distributed as follows:
2012 2 011
Current taxes relating to the period (3,566) (5,331)
Adjustment of current taxes for prior periods (144) 76
Deferred taxes originated or reversed during
the period (568) (1,584)
Remeasurementsof deferred tax assets 180 25
I/S Total income taxes (4,097) (6,814)
Provisions have been made for estimated tax charges that may arise as
a result of prior tax audits. Tax processes are evaluated on a regular basis
and provisions are made for possible outcome when it is probable that
the Volvo Group 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 was deemed necessary were recognized as contin-
gent liabilities.
Deferred taxes amounting to 0 (1) have been recognized in other com-
prehensive income, attributable to fair value of derivative instruments.
At year-end 2012, the Volvo Group’s unused tax-loss carryforwards
amounted to 18,396 (22,462). These loss carryforwards expire according
to the table below:
Due date Dec 31, 2012 Dec 31, 2011
after 1 year 76 40
after 2 years 148 77
after 3 years 267 180
after 4 years 950 434
after 5 years 466 2,302
after 6 years or more 16,489 19,429
Total 18,396 22,462
The Swedish corporate income tax rate amounted 26.3% in 2012. The table
below discloses the principal reasons for the difference between this rate
and the Volvo Group’s tax rate, based on income after financial items.
2012,
%2011, %
Swedish corporate income tax rate 26 26
Difference in tax rate in various countries 3 3
Other non-taxable income (3) (3)
Other non-deductible expenses 1 1
Current taxes attributable to prior years 1 0
Remeasurementof deferred tax assets (1) 0
Income tax rate for the Group 27 27
From 2013 the Swedish corporate income tax rate is 22% as of Decem-
ber 31, 2012. Deferred tax assets and tax liabilities in the Swedish com-
panies have been valued at the new tax rate which has affected income
taxes in the income statement positively by 213.
ACCOUNTING POLICY
SOURCES OF ESTIMATION UNCERTAINTY
!
NOTE 10
INCOME TAXES
NOTES TO FINANCIAL STATEMENTS
FINANCIAL INFORMATION 2012
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