TomTom 2006 Annual Report Download - page 64

62 TomTom Annual Report 2006Notes to the Financial Statements of TomTom NV
Notes to the Financial Statements of TomTom NV
Continued
The movement of the deferred tax liabilities is as follows:
Stock Intangible Total
compensation assets
expense
(in thousands)
Balance as at
31 December 2004 1,301 1,301
Charged to income -545 -545
Balance as at
31 December 2005 756 756
Charged to income -469 -15,044 -15,513
Acquisitions 15,719 15,719
Balance as at
31 December 2006 287 675 962
A deferred tax liability is recognised for the stock
compensation expense related to the share option
plan 2003.
Increased insight into the commercial tax implications of
acquisitions made in 2005 and 2006 resulted in a gross-up
of intangible assets and the recognition of a deferred tax
liability in June 2006. This non-cash event had no impact on
net profit. A large part of this gross-up (15.0 million) was
released during 2006 as a result of amortisation of the
intellectual property and the transfer of intellectual property
between Group companies which resulted in the
recognition of a current tax liability.
21.Off balance sheet commitments
The Group has long-term financial commitments, which
are not shown in the Group’s balance sheet as of
31 December 2006.
These are operating leases for buildings, cars and
office equipment, which consist of:
2006 2005
(in thousands)
Commitments less than 1 year 7,744 1,698
Commitments between 1–5 years 12,550 4,753
Commitments longer than 5 years 43
20,337 6,451
No discount factor is used in determining the operating
lease commitments.
As at 31 December 2006, the Group had open purchase
commitments with our contract manufacturers for certain
products and components. Based on our forecasts of the
number of units we will require, our contract manufacturers
order the requisite component parts from their suppliers.
Our manufacturers have commitments on these
components. In certain circumstances TomTom has a
contractual obligation to purchase these components
from our manufacturers.
Please refer to note 19 for disclosures on tax and legal
contingencies.
22.Business combinations
2006
Acquisition of Applied Generics Ltd.
On 11 January 2006, the Group acquired 100% of
the share capital of Applied Generics for a price of
16.5 million. Applied Generics has developed technology
that makes it possible to generate real-time road traffic
information based on the analysis of mobile network
usage and cell-switching. The technology has the
potential to deliver high-quality traffic information
at a fraction of the investment normally required to
generate traffic information.
TomTom classifies the acquisition of Applied Generics
as an acquisition of a group of identifiable assets and
liabilities which do not meet the definition of a business
under IFRS 3 “Business Combinations”.
2005
Datafactory AG
During August 2005, the Group acquired 100% of
the share capital of Datafactory AG for a price of 14.3
million. Datafactory AG offers an online system for fleet
management. The acquired company contributed
revenues of 2.2 million and a net profit of 0.4 million
to the Group for the period from 25 August 2005 to 31
December 2005. This transaction has been accounted for
using the purchase method of accounting.
Drivetech Inc.
During December 2005, the Group acquired 100%
of the share capital of Drivetech for a price of 2.7 million.
Drivetech is a company that develops navigation software
for the Taiwanese market. The Group consolidated
Drivetech from December 2005 onwards. The transaction
has been accounted for by the purchase method
of accounting.
23.Related party transactions
All related party transactions within the Group are
eliminated.