annual report 2004 - Severočeské doly a.s.

64
——
65
Deferred Taxes, Net
At December 31, 2004 and 2003 deferred tax assets (liabilities) were comprised of the following
(in CZK million):
2004
Deferred tax assets:
2003
Accumulated provision for decommissioning, reclamation and mining damages 1,158 1,130
Accumulated provision for mining damages 213 —
Allowance for uncollectable receivables 5 6
Allowance for obsolete inventory 15 15
Allowance for impairment of fixed assets 115 159
Investments at fair value 1 3
Total deferred tax assets 1,507 1,313
Deferred tax liabilities:
Depreciation of fixed assets (418) (393)
Repairs and maintenance accrual (233) (248)
Capitalized costs of provisions (390) (446)
Investments in associates (61) (139)
Total deferred tax liabilities (1,102) (1,226)
Total deferred tax, net 405 87
Deferred tax assets are recorded at an amount which management believes will ultimately be realized. Realization
of deferred tax assets is dependent upon sufficient future taxable income during the periods that temporary differences
are expected to be available to reduce taxable income.
13. Personnel Expenses and Average Number of Employees
Average number of employees and the composition of personnel expenses (in CZK million):
2004 2003
Wages and salaries 1,238 1,226
Social and other personnel expenses 514 495
Total personnel expenses 1,752 1,721
Number of employees 5,038 5,242
14. Financial Instruments
The Company, in the normal course of business, uses various types of financial instruments, including items such
as cash, cash equivalents, short-term securities and trade receivables, which expose the Company to market or
credit risk. Management believes that the estimated fair values of these financial instruments approximate their
carrying amounts.
The Company pursues a conservative risk management and investment policy, which entails diversifying financial
instruments with reputable financial institutions. There is a written internal policy “Investment strategy and financial
assets management” that governs the allowed types of financial instruments and the rules of risk management
(credit risk, interest rate risk, foreign exchange risk, liquidity risk).
The Company investments contain a portfolio of liquid financial instruments with high quality ratings and
with suitable time horizons. The financial instruments used by the Company for investments include government
bonds, treasury bills, commercial and bank debentures, eurobonds, term deposits and mutual fund units.
The Company monitors the basic market indicators for management of interest rate risk.
15. Commitments and Contingencies
By 2006 the Company will purchase one piece of heavy mining machinery having a value of CZK 906 million.