Annual Report 2014 | Suomeksi |

29 Deferred income taxes

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Accounting policies + -
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the closing date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax assets are set off against deferred tax liabilities if they relate to income taxes levied by the same taxation authority.
Deferred tax is provided on temporary differences arising from investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference is controlled by the Group, and it is probable that the temporary difference will not reverse in the foreseeable future.
Critical accounting estimates: Assumptions and estimates regarding future tax consequences + -
Fortum has deferred tax assets and liabilities which are expected to be realised through the income statement over the extended periods of time in the future. In calculating the deferred tax items, Fortum is required to make certain assumptions and estimates regarding the future tax consequences attributable to differences between the carrying amounts of assets and liabilities as recorded in the financial statements and their tax basis.
Assumptions made include the expectation that future operating performance for subsidiaries will be consistent with historical levels of operating results, recoverability periods for tax loss carry‑forwards will not change, and that existing tax laws and rates will remain unchanged into foreseeable future. Fortum believes that it has prudent assumptions in developing its deferred tax balances.
The Group recognises liabilities for anticipated tax dispute issues based on estimates of whether additional taxes will be due. Where the final outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
If the actual final outcome (regarding tax disputes) would differ negatively from management's estimates with 10%, the Group would need to increase the income tax liability by EUR 39 million as of 31 December 2014.
The movement in deferred tax assets and liabilities during 2014
Deferred taxes in balance sheet, EUR million 1 Jan
2014
Change 31 Dec
2014
Deferred tax assets 126 ‑28 98
Deferred tax liabilities ‑1,338 179 ‑1,159
Net deferred taxes ‑1,212 151 ‑1,061
EUR million 1 Jan
2014
Charged
to
income
state‑
ment
Charged
to other
compre‑
hensive
income
Exchange
rate
differ‑
ences
reclassi‑
fications and
other
changes
Acqui‑
sitions,
disposals
and
assets
held
for sale
31 Dec
2014
Property, plant and equipment ‑1,264 ‑10 118 5 ‑1,150
Pension obligations 7 1 22 ‑2 28
Provisions 24 ‑23 1
Derivative financial instruments ‑46 ‑1 7 ‑40
Tax losses and tax credits carry‑forward 80 ‑7 ‑3 70
Other ‑13 44 ‑1 30
Net deferred taxes ‑1,212 5 29 115 2 ‑1,061
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.
Deferred income tax liabilities of EUR 8 million (2013: 7) have been recognised for the withholding tax and other taxes that would be payable on the all unremitted earnings of Estonian subsidiaries. Unremitted earnings from these companies totalled EUR 38 million on 31 December 2014 (2013: 32).
Change in deferred tax is mainly coming from exchange rate differences in Russia and in Sweden, EUR 115 million.
The movement in deferred tax assets and liabilities during 2013
Deferred taxes in balance sheet, EUR million 1 Jan
2013
Change 31 Dec
2013
Deferred tax assets 169 ‑43 126
Deferred tax liabilities ‑1,561 223 ‑1,338
Net deferred taxes ‑1,392 180 ‑1,212
EUR million 1 Jan
2013
Charged
to
income
state‑
ment
Charged
to other
compre‑
hensive
income
Exchange
rate
differ‑
ences
reclassi‑
fications and
other
changes
Acqui‑
sitions,
disposals
and
assets
held
for sale
31 Dec
2013
Property, plant and equipment ‑1,505 55 45 141 ‑1,264
Pension obligations 22 2 ‑17 7
Provisions 42 ‑18 24
Derivative financial instruments ‑29 ‑9 ‑8 ‑46
Tax losses and tax credits carry‑forward 80 80
Other ‑2 ‑12 ‑13
Net deferred taxes ‑1,392 18 ‑25 45 141 ‑1,212
Deferred tax assets and liabilities from acquisitions, disposals and assets held for sale in 2013 relate to the sale of Fortum Sähkönsiirto Oy and Fortum Espoo Distribution Oy shares in 2014.
See Note 9 Assets held for sale.
Deferred income tax assets are recognised for tax loss carry‑forward to the extent that realisation of the related tax benefit through future profits is probable. The recognised tax assets relate to losses carry‑forward with no expiration date and partly with expiry date as described below.
Deferred income tax assets recognised for tax loss carry‑forwards
2014 2013
EUR million Tax
losses
Deferred
tax
asset
Tax
losses
Deferred
tax
asset
Losses without expiration date 29 4 6 2
Losses with expiration date 260 66 320 78
Total 289 70 327 80
Deferred tax assets of EUR 50 million (2013: 47) have not been recognised in the consolidated financial statements, because the realisation is not probable. The major part of the unrecognised tax asset relates to loss carry‑forwards that are unlikely to be used in the foreseeable future.
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