Adidas 1998 Annual Report Download - page 60

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58 Notes to Consolidated Financial Statements
The Company uses the reduced rate for corporation tax on distributed earnings for
the measurement of deferred tax assets and liabilities related to its German operations.
Deferred taxes of the Company are attributable to the items detailed in the table below:
December 31,
1998 1998 1997
adidas- adidas adidas
(in DM 000) Salomon (comparable) (restated)
Deferred tax assets
Non-current assets 26,102 22,445 18,223
Current assets 131,210 99,370 51,583
Accrued liabilities and provisions 154,755 54,982 40,521
Accumulated tax losses carryforwards 132,011 104,350 124,350
444,078 281,147 234,677
Valuation allowances
(168,812) (136,947) (150,128)
Deferred tax liabilities
Non-current assets 45,419 3,460 5,832
Current assets 12,649 9,913 10,074
Untaxed reserves 1,529 1,033 6,159
Accrued liabilities and provisions 1,030 901 18,075
60,627 15,307 40,140
Deferred tax assets, net
214,639 128,893 44,409
Deferred tax assets and liabilities are offset if they relate to the same fiscal authority.
Hence they are presented on the balance sheet as follows:
December 31,
1998 1998 1997
adidas- adidas adidas
(in DM 000) Salomon (comparable) (restated)
Deferred tax assets 219,793 132,769 54,750
Deferred tax liabilities 5,154 3,876 10,341
Deferred tax assets, net
214,639 128,893 44,409
Deferred tax assets are recognized only to the extent that the realization of the related
benefit is probable. Based on the past performance and the prospects of the business for
the foreseeable future, a valuation allowance is established where this criterion is not met.
The valuation allowances relate primarily to deferred tax assets of adidas America
which has tax loss carryforwards which can be utilized in limited annual amounts within
9 years. Other valuation allowances refer to companies operating in the start-up phase or in
certain emerging markets, since the realization of the related tax benefits is not probable.