NOTES
74•Consolidated financial statements
PANDORAANNUAL REPORT 2014
SECTION 2: RESULTS FOR THE YEAR, CONTINUED
Accountingpolicies
Income tax
TheGroup is taxed jointlywith itsDanish subsidiaries.These
subsidiaries are included in the joint taxation from thedate
theyareconsolidated in theconsolidatedfinancial statements
andup to thedateonwhich theyareno longer consolidated.
Current taxassets and liabilities for current andprior periods
aremeasuredat theamounts expected tobe recovered from
or paid to the taxauthorities.The tax rates and tax laws used
to compute the amount are those enacted or substantively
enacted, by the reporting date, in the countrieswhere
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 the accounting profit
nor taxable profit or loss.
Deferred tax assets are recognised for all deductible
temporary differences, carry-forward of unused tax credits
andunused tax losses to the extent that it is probable that
taxable profit will be available.The deductible temporary
differences and the carry-forwardof unused tax credits and
unused tax losses can be offset against this profit except
where the deferred tax asset relating to the deductible
temporary difference arises from the initial recognitionof
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. In
respect of deductible temporary differences associated
with investments in subsidiaries, associates and interests
in joint ventures, 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 the temporary differences 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 aremeasured at the
tax rates that are expected to apply in the year when the
asset is realisedor the liability is settled, based on tax rates
(and tax laws) that have been 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 anddeferred tax liabilities
are offset if theGroup had 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 taxworldwide. Significant
estimates are required in determining theworldwide
accrual for income taxes, deferred tax assets and liabilities,
andprovision for uncertain tax positions.
Due to significant differences in tax rates between the
Group entities, a change in the distribution of theGroup’s
profit could have a significant impact on theGroup’s
consolidated tax payments. For instance, the corporate tax
rate inDenmark is 24.5% (will gradually be reduced to
22% in 2016) while inThailand PANDORA is subject to a
Board of Investment agreement (BOI) which significantly
reducesThailand income taxes.
Under theThailandBOI, many types of net income are
free from taxation, while other types of income are subject
to 20% tax.This rate applies to financial years beginning on
or after 1 January 2013. Before that the ratewas reduced
from 30% to 23% in 2012. Under the tax legislation in
Thailand, the classificationof different types of income and
expenses therefore determines the amount of tax payable.
(The BOI status of PANDORA ProductionCo. Ltd. has
currently been granteduntil Q3 2020).
PANDORA has ongoing dialoguewith tax authorities
with regard to the computation of taxable income,
including theDanish andThai authorities. InManagement’s
opinion, the tax expense recognised reflects themost likely
amount required to settle the present obligation, including
potential tax cases.
2.5 TAXATION, CONTINUED
