2008 Registration Document - Rexel

9. INCOME TAXRexel and its French subsidiaries have formed a tax groupfrom January 1, 2006. Rexel uses tax consolidation in othercountries where similar options exist.9.1 Income tax expense(in millions of euros)For the year endedDecember 31,2008 2007Current tax (97.1) (98.7)Deferred tax (14.6) (9.1)Total income tax expense (111.7) (107.8)9.2 Deferred tax assets and liabilitiesChanges in net deferred tax assets are as follows:(in millions of euros) 2008 2007At the beginning of the period (34.1) (46.2)Net income (14.6) (9.1)Change in consolidation scope 45.0 (5.3)Translation differences 2.7 1.9Other changes 16.8 24.6At the end of the period 15.8 (34.1)For the year ended December 31, 2008, change inconsolidation scope is essentially related to Hagemeyer’sacquisition. Other changes consist essentially of tax effecton fair value of derivative instruments recognized directly asequity (€17.3 million).For the year ended December 31, 2007, other changesconsisted essentially of different relative tax assets: (i)€14.7 million of expenses linked to the initial public offeringrelated costs recorded against the share premium, (ii)€4.7 million of fair value of derivative instruments recognizeddirectly as equity; and (iii) €5.2 million of tax losses prior tothe acquisition of Rexel, whose recoverability has becomelikely in 2007.Deferred tax assets and liabilities are broken down asfollows:(in millions of euros)As of December 31,2008 2007Intangible assets (253.7) (184.8)Property, plant and equipment 15.8 (7.8)Financial assets 1.7 1.5Trade accounts receivable 9.7 9.2Inventories 2.9 2.5Employee benefits 44.8 42.3Provisions 12.8 2.4Financing fees 0.4 (5.0)Other items 18.9 9.8Tax losses carried forward 263.8 134.1Deferred tax assets /(liabilities), net 117.1 4.2Valuation allowance on deferredtax assets (101.3) (38.3)Net deferred tax assets /(liabilities)15.8 (34.1)of which deferred tax assets 238.1 127.4of which deferred tax liabilities (222.3) (161.5)In 2008, increase in deferred tax liabilities on intangibleassets relates to assets recognized as part of thebusiness combination with Hagemeyer (see note 3.1.4)for €70.0 million and deferred tax assets on tax lossescarried forward incurred by Hagemeyer entities (mainlyin the Netherlands and in the UK) for an amount of€133.4 million.The valuation allowance on net deferred tax assets,totalling €101.3 million as of December 31, 2008 (from€38.3 million as of December 31, 2007) results from therecoverable amount of net deferred tax assets by tax entity.Valuation allowance is related to Hagemeyer entities for€74.4 million.REXEL 2008 | PAGE 177