Munich Re Group Annual Report 2006 (PDF, 1.8

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Munich Re Group Annual Report 2006 Notes_Notes to the consolidated income statement The decrease in finance costs compared with the previous year is due on the one hand to the redemption of Munich Reinsurance Company´s exchangeable bond in the previous year. On the other hand, the finance costs were reduced owing to the redemption of ERGO International AG´s exchangeable bonds and repayment of ERGO AG´s bank borrowing. Information on the Group’s strategic debt can be found in the management report on page 100 f. and under (18) “Subordinated liabilities” and (25) “Bonds and notes issued”. Recognised tax expenses/income broken down according to Germany and other countries All figures in €m 2006 Prev. year * Current tax 572 1,527 – Germany 446 1,060 – Other countries 126 467 Deferred tax 1,076 –513 – Germany 362 –402 – Other countries 714 –111 Taxes on income 1,648 1,014 * Adjusted owing to first-time application of IAS 19 (rev. 2004). Main components of tax expenses/income All figures in €m 2006 Prev. year * Current tax for financial year 533 1,352 Current tax for other periods 39 175 Deferred tax resulting from the occurrence or reversal of temporary differences 288 –220 Deferred tax resulting from the occurrence or reversal of loss carry-forwards 103 –671 Write-downs of deferred taxes 695 378 Effects of changes in tax rates on deferred tax –10 – Taxes on income 1,648 1,014 * Adjusted owing to first-time application of IAS 19 (rev. 2004). The current tax is derived from the tax results of the financial year, to which the local tax rates of the respective subsidiaries are applied. Deferred tax is also calculated using the local tax rates. Sometimes for simplicity’s sake we use uniform tax rates for individual circumstances or subsidiaries. Changes in tax rates and tax legislation that have already been adopted by the government at the balance sheet date are generally taken into account.. Deferred tax assets are recognised for unused loss carry-forwards to the extent that, on the basis of tax result planning, it is sufficiently probable that they will be utilised. The following table shows the reconciliation between the expected taxes on income and the tax on income actually shown. The expected tax expenses are calculated by multiplying the operating result before taxes on income (after “other tax”) by the Group tax rate. The Group tax rate amounts to 40%. This takes into account corporation tax including solidarity surcharge, and a mixed trade-tax rate. 198 (35) Taxes on income This item shows the corporation tax and municipal trade earnings tax paid by the German companies (including solidarity surcharge) and the comparable taxes on earnings paid by the foreign companies in the Group. In accordance with IAS 12, the determination of taxes on income includes the calculation of deferred taxes.
Munich Re Group Annual Report 2006 Notes_Notes to the consolidated income statement Reconciliation to effective tax expenses All figures in €m 2006 Prev. year * Result before taxes on income (after “other tax”) 5,184 3,765 Group tax rate in % 40.0 40.0 Derived taxes on income 2,074 1,506 Tax effect of: – Tax rate differences –95 42 – Tax-free income –898 –1,634 – Non-deductible expenses 99 653 – Valuation allowances for loss carry-forwards 695 370 – Change in tax rates and tax legislation –379 – – Tax for prior years –9 –49 – Municipal trade earnings tax 72 55 – Other 89 71 Taxes on income shown 1,648 1,014 * Adjusted owing to first-time application of IAS 19 (rev. 2004). The effective tax burden is the ratio between the taxes on income recognised and the result before taxes on income (after “other tax”). In the year under review, the tax burden amounted to 32% (previous year: 27%). “Tax-free income” is made up of tax-free gains on the sales of shareholdings in joint-stock companies, tax-free dividend income and other tax-free income. Following a change in German corporate tax legislation that entered into force at the turn of the year 2006/2007, existing corporate tax credit will be paid out in the years 2008 to 2017. The claim had to be recognised in the 2006 balance sheet as an account receivable at its present value of €379m, resulting in a corresponding entry in the income statement (cf. page 67 in the management report). However, this positive one-off tax effect was more than offset by valuation allowances for deferred tax assets due to loss carry-forwards at our subsidiary Munich Re America Corporation (formerly American Re Corporation). The item “municipal trade earnings tax” includes the differences between the trade-tax rate applied by the respective Group companies and the Group mixed trade-tax rate. No deferred taxes were recognised for retained earnings of affiliated companies, as there is no intention of distributing these earnings in the foreseeable future. The calculation of this unrecognised deferred tax would involve a disproportionately large amount of work. 199
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Munich Re Group Annual Report 2006
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The Munich Re Group Our operations
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Munich Re Group in 2006 Tireless an
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Consolidated financial statements a
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Page 238: © 2007 Münchener Rückversicherun
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Munich Re Group Annual Report 2006 (PDF, 1.8

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