| | 34.7)
DEFERRED TAXES: Under IAS 12 (revised) Income Taxes and under
US GAAP, unrealized profits resulting from intercompany transactions are eliminated
from the carrying amount of assets, such as inventory. In accordance with IAS
12 (revised) the Group calculates the tax effect with reference to the local tax
rate of the company that holds the inventory (the buyer) at period-end. However,
US GAAP requires that the tax effect is calculated with reference to the local
tax rate in the seller’s or manufacturer’s jurisdiction. The effect of this difference
decreased US GAAP income in 2005 by USD 69 million (2004: USD 100 million income)
and reduced equity by USD 581 million (2004: USD 510 million).
The deferred tax effect related to the US GAAP purchase accounting of Ciba-Geigy
resulted in an additional USD 156 million income (2004: USD 122 million) and reduced
equity by USD 604 million (2004: USD 869 million). The
deferred tax effect on other US GAAP adjustments for 2005 resulted in an additional
USD 91 million income (2004: USD 201 million) and reduced equity by USD 253 million
(2004: USD 703 million). The deferred tax asset less
valuation allowance at December 31, 2005 and 2004 comprises USD 1 455 million
and USD 1 174 million of current assets and USD 2 798 million and USD 1 893 million
of non-current assets respectively. The deferred tax liability at December 31,
2005 and 2004 comprises USD 866 million and USD 695 million of current liabilities
and USD 4 896 million and USD 4 257 million of non-current liabilities respectively.
34.8) SHARE-BASED COMPENSATION: The Group
has elected to adopt FAS 123 (revised) Share-Based Payment from January
1, 2005, using a modified retrospective application. As described in Note 27,
the Group has several plans that are subject to measurement under FAS 123 (revised).
However, not all amounts can be retroactively restated and there are differences
in the transitional rules, which results in a new difference in the income statement
between IFRS and US GAAP. As a result of this difference, an additional expense
was recognized under US GAAP in 2005 of USD 44 million (2004: USD 61 million).
Under IFRS, the Group accounts for all share based
compensation equity-settled transactions in equity. However, under US GAAP an
arrangement which is a fixed monetary amount that is settleable with a variable
number of the issuer’s equity shares is classified as a liability. USD 96 million
booked in the IFRS equity at December 31, 2005 and USD 118 million booked at December
31, 2004 in the IFRS equity was reversed for US GAAP purposes. | | 34.9)
CURRENCY TRANSLATION ADJUSTMENT: During 2004, under IFRS the Group
recorded a recycling gain from cumulative translation differences of USD 301 million
arising from the partial repayment of capital of a subsidiary. US GAAP does not
recognize this concept so this gain has been eliminated for US GAAP purposes.
The Group has accounted for operations in highly inflationary
economies in accordance with IAS 21 (revised) and IAS 29. The accounting under
IAS 21 (revised) and IAS 29 complies with Item 18 of Form 20-F and is different
from that required by US GAAP.
34.10)
MINORITY INTERESTS: In contrast to IFRS, minority interests are deducted
in the determination of US GAAP net income and excluded from total equity. | |
