Notes 11-15

15. Deferred tax

The Group’s deferred tax assets and liabilities are measured at the end of each period in accordance with IAS 12. The recognition of deferred tax assets is determined by reference to the Group’s estimate of recoverability, using models where appropriate to forecast future taxable profits.

Deferred tax assets are recognised in relation to an element of the Group’s defined benefit pension provisions. Assets have only been recognised for territories where the Group considers that it is probable there would be sufficient taxable profits for the future deductions to be utilised.

Certain deferred tax assets and liabilities have been offset as they relate to the same tax group. The following is the analysis of the deferred tax balances for financial reporting purposes:


 
 

Gross
£m

Offset
£m
As
reported
£m
2008
Deferred tax assets 68.7 (3.1) 65.6
Deferred tax liabilities (920.2) 3.1 (917.1)
(851.5) (851.5)


2007
Deferred tax assets 109.6 (53.6) 56.0
Deferred tax liabilities (517.6) 53.6 (464.0)
(408.0) (408.0)

The following are the major gross deferred tax assets recognised by the Group and movements thereon in 2008 and 2007:


 
 
 
 

 
Tax
losses
£m

Retirement
benefit
obligations
£m

Deferred
comp-
ensation
£m
Other
short-term
temporary
differences
£m

 
 
Total
£m
At 1 January 2007 24.3 20.8 49.0 36.6 130.7
Credit/(charge) to income 10.0 1.5 (5.2) (20.7) (14.4)
Charge to equity (9.9) (0.5) (10.4)
Exchange differences 1.9 1.0 (0.4) 1.2 3.7
At 31 December 2007 36.2 13.4 42.9 17.1 109.6
Acquisition of subsidiaries 1.6 13.1 14.7
(Charge)/credit to income (27.1) (26.6) 1.2 (52.5)
Credit/(charge) to equity 0.7 (9.0) (8.3)
Exchange differences 0.3 4.9 5.2
At 31 December 2008 9.1 16.0 12.2 31.4 68.7

Other short-term temporary differences comprise a number of items, none of which is individually significant to the Group’s balance sheet. At 31 December 2008 £22.3 million of this balance related to temporary differences in relation to accounting provisions.

In addition the Group has recognised the following gross deferred tax liabilities and movements thereon in 2008 and 2007:


 
 
 
 

Brands
and other
intangibles
£m

 
Associate
earnings
£m

 
 
Goodwill
£m
Other
short-term
temporary
differences
£m

 
 
Total
£m
At 1 January 2007 442.8 17.0 19.3 10.5 489.6
Acquisition of subsidiaries 25.4   25.4
(Credit)/charge to income (15.9) 2.3 0.2 15.1 1.7
Exchange differences (9.9) (9.9)
Transfer to current tax (0.8) 13.0 (1.4) 10.8
At 31 December 2007 442.4 18.5 32.5 24.2 517.6
Acquisition of subsidiaries 214.3 20.7 13.9 248.9
(Credit)/charge to income (25.5) 0.8 14.6 (34.2) (44.3)
Exchange differences 180.0 1.8 14.1 2.1 198.0
At 31 December 2008 811.2 21.1 81.9 6.0 920.2

At the balance sheet date, the Group has gross tax losses and other temporary differences of £4,002.8 million (2007: £3,141.5 million) available for offset against future profits. Deferred tax assets have been recognised in respect of the tax benefit of £206.2 million (2007: £290.5 million) of such tax losses and other temporary differences. No deferred tax asset has been recognised in respect of the remaining £3,796.6 million (2007: £2,851.0 million) of losses and other temporary differences as the Group considers that there will not be enough taxable profits in the entities concerned such that any additional asset could be considered recoverable. Included in the total unrecognised temporary differences are losses of £61.8 million that will expire by 2017, £225.5 million that will expire by 2020, £255.6 million that will expire by 2022 and an additional £27.3 million that will expire by 2028. £2,553.7 million of losses may be carried forward indefinitely.

At the balance sheet date, the aggregate amount of the temporary differences in relation to the investment in subsidiaries for which deferred tax liabilities have not been recognised was £18,173.0 million (2007: £6,754.0 million). No liability has been recognised in respect of these differences because the Group is in a position to control the timing of the reversal of the temporary differences and the Group considers that it is probable that such differences will not reverse in the foreseeable future.

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