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21. Deferred taxes
The Group’s exposure from derivative instruments is limited to the risk that the counterparty will
be unable to fulfill its obligations. The maximum default risk for the Group cannot exceed the
positive fair values of the derivatives. In the case of forward exchange contracts, the maximum
risk is the exchange rate fluctuation of the hedged amounts.
In accordance with SFAS 109 (Accounting for Income Taxes), deferred tax assets and liabilities
are recognized for the estimated future tax effects resulting from temporary differences between
the reported carrying amounts of assets and liabilities and their tax bases and secondly as a
result of tax loss carryforwards.
Taxes on income for the Group are made up as follows:
‘000 euros
Current taxes
2004 2003
Germany 2,795 –104
Abroad
Deferred taxes
10,476 6,578
Germany –4,837 662
Abroad 1,165 2,119
Total 9,599 9,255
Long-term deferred taxes were recognized on the basis of an overall tax rate of 37.5 percent
(2003: 37.5 percent). This rate is calculated assuming a corporate income tax rate (including the
solidarity surcharge) of 26.4 percent (2003: 26.4 percent) and an average trade tax burden
at the German companies of 11.1 percent (2003: 11.1 percent). Short-term deferred taxes that
are expected to reverse in the following year are also calculated applying an overall tax rate
of 37.5 percent (2003: 37.5 percent). This rate is determined based on a corporate income tax
charge (including the solidarity surcharge) of 26.4 percent (2003: 26.4 percent) and an average
trade tax burden of 11.1 percent (2003: 11.1 percent). Changes in tax rates resulted in deferred
tax expense in 2004 of 0 thousand euros (2003: deferred tax income of 11 thousand euros).
The computations for foreign companies are based on their respective local tax rates.
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