Annual Report 2017

27. Deferred Income Taxes

During 2017, resulting from a detailed review of its deferred tax positions in line with the criteria of IAS 12 Income Taxes, the presentation relating to deferred income tax assets and deferred income tax liabilities for certain qualifying positions has changed from gross presentation to a net presentation. The comparable figures at 31 December 2016 changed and the only impact is a decrease of €60,193 in both ’Deferred income tax assets’ and ’Deferred income tax liabilities’.

Had the deferred income tax positions at 31 December 2017 been reported on a gross basis, the impact would have been an increase of €61,160 in both ’Deferred income tax assets’ and ’Deferred income tax liabilities’.

Had the deferred income tax positions at 1 January 2016 been reported on a net basis, the only impact would have been a decrease of €52,860 in both ’Deferred income tax assets’ and ’Deferred income tax liabilities’.

in thousands of EUR

Notes

2017

2016

The movement on the deferred income tax assets is as follows:

Gross amount at 1 January

74,617

67,186

Acquisitions

6

6,533

128

Income Statement impact

4,279

4,744

Change because of income rate change

- 3,942

- 1,856

Processed through Other comprehensive income

162

3,607

Reclassification

- 225

6

Exchange differences

- 2,923

802

Gross amount at 31 December

78,501

74,617

Offset assets and liabilities

- 61,160

- 60,193

Net amount at 31 December

17,341

14,424

Analysis of the gross amount of deferred income tax assets is as follows:

- Deferred income tax asset to be recovered after more than 12 months

49,756

51,279

- Deferred income tax asset to be recovered within 12 months

28,745

23,338

78,501

74,617

The movement on the deferred income tax liability is as follows:

Gross amount at 1 January

134,040

142,565

Acquisitions

6

31,796

3,130

Income Statement impact

- 9,518

- 3,664

Change because of income rate change

- 9,696

- 8,980

Processed through Other Comprehensive Income

- 841

1,179

Reclassification

- 225

- 50

Exchange differences

- 3,450

- 140

Gross amount at 31 December

142,106

134,040

Offset assets and liabilities

- 61,160

- 60,193

Net amount at 31 December

80,946

73,847

Analysis of the gross amount of deferred income tax liabilities is as follows:

- Deferred income tax liability to be settled after more than 12 months

127,962

121,189

- Deferred income tax liability to be settled within 12 months

14,144

12,851

142,106

134,040

Net deferred income taxes

63,605

59,423

Specification of gross deferred income tax assets

in thousands of EUR

31 December 2017

31 December 2016

Property, plant and equipment

5,873

5,449

Goodwill

240

224

Other intangible assets

7,938

5,738

Inventories

4,825

3,758

Post-employment benefits

18,457

14,419

Provisions

9,681

9,466

Derivative financial instruments

1,872

1,197

Deferred revenue and to be invoiced amounts

7,631

6,787

Trade and other payables

4,502

4,242

Deferred taxes on temporary differences

61,019

51,280

Deferred taxes on carry forward losses

17,482

23,337

Total deferred income tax assets

78,501

74,617

Specification of gross deferred income tax liabilities

in thousands of EUR

31 December 2017

31 December 2016

Property, plant and equipment

9,709

10,248

Goodwill

38,021

38,476

Other intangible assets

89,962

74,951

Inventories

252

28

Post-employment benefits

427

77

Provisions

1,917

7,926

Derivative financial instruments

279

1,202

Deferred revenue and to be invoiced amounts

260

842

Trade and other payables

1,279

290

Total deferred income tax liabilities

142,106

134,040

Deferred income tax assets on carryforward losses have been recognized for an amount of €17,482 (2016: €23,337). The losses are recognized based on taxable temporary differences or future expected results taking into consideration the expiration date of historical losses and other tax regulations. The related income tax losses amount to €66,701 (2016: €80,317). Deferred tax assets of €14,545 (2016: €13,385) relate to entities which suffered a loss in either the current or the preceding period. For loss making entities, carry forward losses are recognized as a deferred tax asset if it is likely that future taxable profits will be available against which losses can be set off, or to the extent that sufficient taxable temporary differences are available.

Unrecognized income tax losses amount to €280,814 (2016: €251,882). These tax losses expire as follows:

in thousands of EUR

31 December 2017

31 December 2016

Expiring within one year

3,401

5,890

Expiring between one and two years

5,335

5,782

Expiring between two and five years

20,563

22,840

Expiring after more than five years

49,171

10,726

Offsettable for an unlimited period

202,344

206,644

280,814

251,882

The unrecognized tax losses offsettable for an unlimited period relate, amongst others to entities in Spain and Brazil. The unrecognized tax losses generated in Spain are subject to alternate views from the Spanish tax authorities. For group companies with a history of recent losses and the absence of expected future taxable results, deferred tax assets have been recognized only to the extent of taxable temporary differences.

The Group considered and incorporated the impact on the assumptions used in its goodwill impairment tests also in 2017 resulting from the outcome of the UK referendum in 2016 on European Union membership.

The enactment of the United States Tax Cuts and Jobs Act on 22 December 2017 had no impact on the Group’s consolidated reported deferred tax positions as those related to the United States are nihil on a net basis per year-end 2017.