93 / 143
NOTES
Consolidated financial statements • 91
SECTION 2: RESULTS FOR THE YEAR, CONTINUED
Accounting policies
Income tax
PANDORA A/S is taxed jointly with its Danish subsidiaries.
These subsidiaries are included in the joint taxation from
the date they are recognised in the consolidated financial
statements and up to the date on which they are no longer
consolidated. Current tax assets and liabilities for current and
prior periods are measured at the amounts expected to be
recovered from or paid to the tax authorities. The tax rates and
tax laws used to compute the amounts are those enacted
or substantively enacted, by the reporting date, in the
countries where PANDORA operates and generates taxable
income.
Deferred tax
Deferred tax is provided using the balance-sheet liability
method on temporary differences at the reporting date
between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes. Deferred
tax liabilities are recognised for all temporary differences,
except where the deferred tax liability arises from the
initial recognition of goodwill or of an asset or liability in
a transaction that is not a business combination and, at the
time of the transaction, affects neither accounting profit nor
taxable profit or loss.
Deferred tax assets are recognised for all deductible
temporary differences, carry-forwards of unused tax credits
and unused tax losses to the extent that it is probable that
taxable profit will be available. Deductible temporary
differences, carry-forwards of unused tax credits and
unused tax losses can be offset against taxable profit except
where the deferred tax asset relating to the deductible
temporary difference arises from the initial recognition of
an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss. With
respect to deductible temporary differences associated
with investments in subsidiaries, deferred tax assets are
recognised only to the extent that it is probable that the
temporary differences will reverse in the foreseeable future
and taxable profit will be available against which they can
be utilised. The carrying amount of deferred tax assets is
reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profit will
be available to allow all or part of the deferred tax asset to
be utilised.
Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply in the year the asset
is realised or the liability settled, based on tax rates (and
tax laws) enacted or substantively enacted at the reporting
date. Deferred tax items are recognised in correlation
to the underlying transaction either in the statement of
comprehensive income or directly in equity. Deferred tax
assets and liabilities are offset if the Group has a legally
enforceable right to offset current tax assets against current
tax liabilities and the deferred tax relates to the same
taxable entity and the same tax authority.
Significant accounting estimates
PANDORA is subject to income tax in the countries
in which the Group operates, comprising various tax
rates worldwide. Significant judgements are required
in determining the accrual for income taxes, deferred
tax assets and liabilities, and provision for uncertain tax
positions.
Changes in the profit allocation within entities could
therefore have a significant impact on the Group’s
consolidated tax expense. For instance, the corporate tax
rate in Denmark is 22% while, in Thailand, PANDORA is
subject to Board of Investment agreements (BOIs), which
significantly reduces Thailand income taxes.
Under the Thailand BOIs, many types of net income
are tax exempt, while other types of income are subject to
20% tax. The classification of different types of income and
expenses therefore determines the applicable tax rate.
As part of PANDORA conducting business globally,
disputes with tax authorities may occur. Any unsettled
disputes with local tax authorities are recognised under
income tax payable/receivable based on an assessment of
the most likely outcome. However, the actual obligation may
deviate from this and is dependent on the result of litigations
and settlements with the tax authorities.
2.5 TAXATION, CONTINUED