Mercedes 2012 Annual Report Download - page 205

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In 2012, the development of deferred tax assets, net, is shown
in table  7. 23 .
Including the items recognized in other comprehensive
income/loss (including items from investments accounted
for using the equity method), the expense for income taxes
is composed as shown in table  7.24 .
In the statement of financial position, the valuation allowances on
deferred tax assets, which are mainly attributable to foreign
companies, decreased by €1,228 million compared to December
31, 2011. On the one hand, this is a result of the reversal
of valuation allowances of €283 million recorded in net profit.
On the other hand, the capital losses resulting from the sale
of the former investment in Chrysler were reduced. The deferred
tax assets on those capital losses were in the past completely
offset by a valuation allowance because the losses have a limited
carryforward period and can only be offset by gains on dis-
posal of capital. Additionally, a decrease of the valuation allow-
ance was recognized in equity due to the expiration of tax
losses which were already adjusted by a valuation allowance
at December 31, 2011 and due to translation effects.
At December 31, 2012, the valuation allowance on deferred
tax assets relates, among other things, to tax loss carryforwards
in connection with capital losses (€1,119 million), corporate
income tax loss carryforwards (€530 million) and tax credits
(€15 million). The deferred tax assets on loss carryforwards
connected with capital losses were reduced to zero by valuation
allowances because the carryforward periods of those losses
are limited and can only be utilized with future capital gains.
These are not expected to occur in the coming years. Of the
total amount of deferred tax assets adjusted by valuation
allowances, deferred tax assets in connection with capital losses
amounting to €740 million expire in 2014, €98 million expire
in 2015 and €281 million expire in 2016. Deferred tax assets
for corporate income tax loss carryforwards amounting to
€158 million expire in 2013, €5 million expire at various dates
from 2015 through 2017, €244 million expire at various dates
from 2018 through 2032 and €123 million can be carried forward
indefinitely. Of the deferred tax assets for tax credit carry-
forwards adjusted by a valuation allowance, €7 million expire
at various dates from 2013 through 2017 and €8 million expire
at various dates from 2018 through 2032. Furthermore, the
valuation allowance primarily relates to temporary differences
and net operating losses for state and local taxes at the
US companies. Daimler believes that it is more likely than not
that those deferred tax assets cannot be utilized. In 2012
and prior years, the Group had tax losses at several subsidiaries
in several countries. After offsetting the deferred tax assets
with deferred tax liabilities, the deferred tax assets not subject
to valuation allowances amounted to €270 million for those
foreign subsidiaries. Daimler believes it is more likely than not
that due to future taxable income, deferred tax assets which
are not subject to valuation allowances can be utilized. In future
periods, Daimler’s estimate of the amount of deferred tax
assets that is considered realizable may change, and hence
the valuation allowances may increase or decrease.
The Group did not recognize deferred tax liabilities on retained
earnings of non-German subsidiaries of €16,106 million
(2011: €14,539 million) because these earnings are intended
to be permanently reinvested in those operations. If the
dividends are paid out an amount of 5% of the dividends will
be taxed under the German taxation rules and, if applicable,
with non-German withholding tax. Additionally, income tax
consequences could arise if the dividends first had to be distrib-
uted by a non-German subsidiary to a non-German holding
company. Normally, the distribution would lead to an additional
income tax expense. It is not practicable to estimate the
amount of taxable temporary differences for these undistrib-
uted foreign earnings.
The Group has various unresolved issues concerning
open income tax years with the tax authorities in a number
of jurisdictions. Daimler believes that it has recognized
adequate provisions for any future income taxes that may
be owed for all open tax years.
Change of deferred tax assets, net
2012 2011
In millions of euros
Deferred tax assets, net as of January 1 1,691 1,938
Deferred tax expense -1,036 -476
Change in deferred tax expense/benefit
on financial assets available-for-sale included
in other comprehensive income/loss
.
-3
Change in deferred tax expense/benefit
on derivative financial instruments included
in other comprehensive income/loss
-287
173
Income tax expense for deduction in excess
of compensation expense for equity-settled
employee stock option plans
–
-1
Other changes1-73 60
Deferred tax assets, net as of December 31 295 1,691
1 Primarily effects from currency translation.
7. 2 3
Tax expense in equity
2012 2011
In millions of euros
Income tax expense -1,223 -2,420
Income tax expense (benefit)
recorded in other reserves
-309
205
Income tax expense for deduction in excess
of remuneration expense for equity-settled
employee stock option plans
–
-1
-1,532 -2,216
7. 2 4