OFFERING MEMORANDUM Global Offering of up to ... - Nordex

written off in the year of their addition, however, no significant effects on the group’s net income were
thus caused. In the fixed-asset analysis, low-value assets are imputed to have been disposed of in the
year of their addition.
In accordance with IAS 20, any investment grants and/or allowances received for the purchase of fixed
assets were treated as a reduction in asset cost.
The production cost components to be included according to IAS were recognized wherever the costs
were reliably measurable. The cost of borrowings was recognized as a charge to income.
Amortization of intangible assets and depreciation of property, plant & equipment were based on the
following asset ranges (useful lives):
Useful life Rate charged
Capitalized development costs 5 years 20%
Licenses, EDP software and similar rights 2-5 years 20%-50%
Land and equivalent titles, and buildings 10-25 years 4%-10%
Production plant and machinery 4-12 years 8.33%-25%
Factory and office equipment 2-18 years 5.56%-50%
For the movements of fixed assets, reference is made to the fixed-asset analyses attached to these
Notes.
Financial assets were stated at cost.
Deferred taxes were recognized in accordance with IAS 12 and resulted from the restatement of the
separate annual accounts as well as from consolidation transactions.
The following facts and circumstances underlay deferred taxation in the separate financial statements:
IAS 12 strictly requires that deferred tax assets be capitalized on tax loss carryovers wherever an offset
against profits available in future periods is reasonably likely. At the amount of the deferred tax assets,
the current tax expense was out of proportion to the disclosed net income. For preparing the
(combined) pro forma consolidated financial statements, deferred tax assets were capitalized for tax
losses carried over by Nordex GmbH from 1997 and earlier periods to the extent that such losses could
be claimed from the German IRS. The deferred tax assets were released at the amounts needed to
offset taxes on the profits earned in 1998 and 1999.
In addition, according to IAS 12, temporary differences between the assets, accruals and liabilities
recognized in the IAS-based accounts and the corresponding tax bases entail the obligatory disclosure
of deferred tax assets or liabilities. Deferred tax assets or liabilities were recognized for temporary
differences at the amount at which the current tax expense shown was out of proportion to the stated
profit or loss. In the years under review, deferred tax assets or liabilities were solely recognized for
effects of the restatement according to IAS since the HGB-based financial statements of Nordex GmbH
presented only insignificant temporary differences versus the corresponding tax bases and all other
subsidiaries were bound by P&L transfer agreements with Borsig Energy GmbH. The resultant, yet
unrecognized, deferred taxes are negligible.
An obligation under IAS 12 to recognize deferred taxes ensued from certain consolidation transactions,
viz. the elimination of intercompany profits when applying the percentage-of-completion method, as
well as from physical trade transactions and the accounting for transactions based on capital leases
from a group vantage point.
For enhanced comparability, the deferred taxes were calculated on the basis of future tax rates, viz. a
corporate income tax rate of 25%, a solidarity surtax thereon of 5.5%, and municipal trade tax on
income at the local factor of the municipality of residence of each subsidiary.
Deferred tax assets and liabilities were disclosed separately in the balance sheets and not netted unless
their offset could be claimed against the same tax office.
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