Annual Report for the year ended 31 December 2008

1. aCCoUntinG PoliCies (CONTINuED)
The issuance by the company to employees of its subsidiaries of an award
over the company’s shares is treated as a capital contribution by the
company in its subsidiaries. This additional investment in subsidiaries
results in a corresponding entry to shareholders’ equity. The additional
capital contribution is based on the fair value of the awards issued
allocated on a straight line basis over the relevant vesting period.
Current and deferred income taxes
current income taxes are computed on a basis of the tax laws enacted or
substantially enacted at the Balance sheet date in the countries where the
company’s subsidiaries operate and generate income.
Taxes are computed using the liability method, deferred income on
temporary differences between the bases of assets and liabilities and their
carrying amounts in Financial statements. The deferred income tax is not
accounted for if it 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 nor loss.
Deferred income tax liabilities are recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which tax losses or
deductible temporary differences can be utilised. such assets and liabilities
are not recognised if the temporary difference arises from goodwill, negative
goodwill or from the acquisition of an asset, which does not affect either
taxable or accounting income.
Deferred income tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, except where the
company is able to control the reversal of the temporary difference
and it is probable that the temporary difference will not reverse in the
foreseeable future.
notes to tHe FinanCial statements CONTINuED
FOR THE YEAR ENDED 31 DECEMBER 2008
84 The evoluTion Group plc AnnuAl reporT & AccounTs 2008
Deferred income tax is charged or credited in the income statement, except
when it relates to items charged or credited directly to equity, in which case
the deferred tax is also dealt with in equity.
The company is entitled to a tax deduction for amounts treated as
compensation on exercise of certain employee share options under uK tax
rules. As explained under “share-based plans” above, a compensation
expense is recorded in the company’s income statement over the period
from the grant date to the vesting date of the relevant options. As there is a
temporary difference between the accounting and tax bases, a deferred tax
asset is recorded. The deferred tax asset arising is calculated by comparing
the estimated amount of tax deduction to be obtained in the future (based
on the company’s share price at the Balance sheet date) with the
cumulative amount of the compensation expense recorded in the income
statement. if the amount of estimated future tax deduction exceeds the
cumulative amount of the remuneration expense, at the statutory tax rate,
the excess is recorded directly in equity, against retained earnings.
in accordance with the provisions of iFrs 2, no compensation charge is
recorded in respect of options granted before 7 november 2002 or in
respect of those options which have been exercised or have lapsed before 1
January 2005. nevertheless, tax deductions have arisen and will continue
to arise on these options. The tax effects arising in relation to these options
are recorded directly in equity, against retained earnings.