19. Deferred and current income taxes

(amounts in millions of €, unless otherwise indicated)

19.1 Deferred income tax assets

Deferred tax assets are attributable to the following:

	2008		2007
Goodwill	98.4		113.3
Tax losses carry-forward	136.0		69.6
Temporary differences	187.6		99.6
Total deferred income tax assets	422.0		282.5

Deferred tax assets in relation to goodwill comprise the tax effects arising from goodwill that has been directly charged to shareholders’ equity at acquisition date, based on (Dutch) accounting principles prevalent at that time and in accordance with the exemptions offered by IFRS 1 at the date of transition to IFRS (January 1, 2004).
Deferred tax assets in relation to tax losses carry-forward comprise an amount of € 124 million (2007: € 62 million) in receivables originating from subsidiaries that showed (tax) losses in the current or preceding year. At balance sheet date, the net valuation of these deferred tax assets is determined based upon the probable recoverability, which in turn is based upon management’s expectations.
Deferred tax assets in relation to temporary differences originate from differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

The composition of deferred tax assets in relation to temporary differences is as follows:

	2008		2007
Property, plant, equipment and software	13.2		10.0
Other receivables / other payables	127.9		68.8
Provisions	46.5		20.8
	187.6		99.6

The recoverability of deferred tax assets resulting from net operating losses and timing differences is reviewed and assessed annually, using forecasts that are based on the actual operating results and the expected future performance based on management’s estimates and assumptions of revenue growth and development of operating margins of the Group companies concerned, assessed with external data. Significant judgment is required. Deviations from these estimates and assumptions can affect the value of deferred tax assets and may, in that case, have a material impact on the effective tax rate. The actual outcome may differ significantly from the outcome estimated by management.

These projections are based on internal projections and strategic plans and are assessed with a number of scenarios to cover reasonable changes in the assumptions of the projections. These changes mainly relate to variations in revenue growth percentages and operating margin percentages. The deferred tax assets are only recognized to the extent that it is considered probable that future taxable profits will be available against which these deferred tax assets can be utilized.
The several scenarios give potential outcomes that deviate from the carrying amount within a range of up to € 50 million, upwards or downwards.

Certain deferred tax assets, the recoverability of which is considered not probable, are valued at nil. These comprise deferred tax assets relating to goodwill of approximately € 4 million (2007: approximately € 4 million), deferred tax assets in relation to tax losses carry-forward of approximately € 66 million (2007: approximately € 92 million) and deferred tax assets relating to other temporary differences of approximately € 27 million (2007: approximately € 26 million). The majority of the unrecognized tax losses will expire between 2022 and 2028.

The part of deferred tax assets that is expected to be recovered within one year is estimated at € 10 million (2007: € 11 million).

19.2 Deferred income tax liabilities

Deferred income tax liabilities are attributable to the following:

	2008		2007
Recapture obligations	58.5		266.3
Temporary differences	283.4		21.0
Total deferred income tax liabilities	341.9		287.3

The deferred tax liability with respect to recapture obligations ensues from incorporation in the Netherlands of tax losses incurred in Germany (2007: the United States and Germany). An amount of Euro 186.1 million has been released to the income statement after restructurings in the Group, since it is considered highly unlikely that these have to be paid in the future. As soon as the ‘recapture obligation’ is expected to materialize in the future, this will lead to a tax liability and an increase in the effective tax rate.
The deferred tax liability for temporary differences originates from differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. An amount of € 273.3 million (2007: € 17.7 million) is included in temporary differences in relation to the valuation of acquisition-related intangible assets upon acquisition.

The part of deferred tax liabilities that is expected to be settled within one year is estimated at € 68 million (2007: € 38 million).

19.3 Movements in total position taxes on income

Changes in the total position of taxes on income are:

	2008		2007
Assets / (liabilities) taxes on income
Deferred tax assets	282.5		329.0
Current income tax receivables	20.1		6.1
Deferred tax liabilities	-287.3		-298.9
Current income tax payables	-57.5		-48.4
Value at January 1	-42.2		-12.2
Movements during the year
Charged to income statement	121.0		-154.6
Net payments	205.4		153.0
Acquisition of subsidiaries’ deferred taxes	-242.8		-9.6
Acquisition of subsidiaries’ income taxes	33.8		-0.6
Disposal of subsidiaries’ deferred taxes	-0.3		-
Effect on deferred taxes from adjustments to acquisitions in prior years	-		1.1
Recognized in shareholders’ equity	10.0		1.9
Translation gains/(losses)	21.3		-21.2
Total movements	148.4		-30.0
Assets / (liabilities) taxes on income
Deferred tax assets	422.0		282.5
Current income tax receivables	67.7		20.1
Deferred tax liabilities	-341.9		-287.3
Current income tax payables	-41.6		-57.5
Value at December 31	106.2		-42.2