Aktsiaselts Tallink Grupp - NASDAQ OMX Baltic

FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED AUGUST 31, 2005
NOTES TO THE FINANCIAL STATEMENTS—(Continued)
Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The company’s potential tax liability related to the distribution of its retained earnings as dividends is not
recorded in the balance sheet. The amount of potential tax liability related to the distribution of dividends
depends on when, how much and from which sources the dividends are paid out.
Income tax from the payment of dividends is recorded as income tax expense at the time of declaring the
dividends.
Swedish, Finnish and Russian subsidiaries:
In accordance with income tax acts, the company’s net profit adjusted by temporary and permanent
differences determined in income tax acts is subject to income tax in Finland, Sweden and Russia (in Finland the
tax rate was 29% until December 31, 2004 and currently is 26%, in Sweden 28% and in Russia 22%).
Deferred income tax is provided, using the liability method, on all temporary differences at the balance
sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes. Deferred tax assets are recognized only when it is probable that profit will be available against which
the deferred tax assets can be utilized.
Tax to be paid is reported under current liabilities and deferred tax under non-current liabilities.
Other subsidiaries:
The net profit of shipping companies registered in Cyprus and Bahamas and dividends paid by these
companies are treated without income tax. Thus there are no temporary differences between the tax bases and
carrying values of assets and liabilities that may cause the deferred income tax.
Note 3 SEGMENT INFORMATION
The Group’s operating businesses are organized and managed separately according to the nature of the
different markets. The Group operates (1) seven ships between Estonia and Finland, (2) four ships between
Estonia and Sweden, (3) one ship first between Estonia and Russia until the end of year 2004, after which the
vessel was leased under a time charter agreement and (4) one hotel and one shop in Estonia, which represent
different business segments.
The Group’s market share on the Estonia—Finland route is approximately 43% in passenger transportation
and approximately 45% in cargo transportation, while the market share on the Estonia—Sweden route is
approximately 100% in passenger transportation and approximately 100% in cargo transportation (according to
the Port of Tallinn).
In previous years financial statements there was separate segment of the Estonia—Russia route. As this
route was closed (the total operating period was nine months: five in the previous financial year and four months
this financial year) and its revenue was below 1.5% of the Group’s total revenue in each of these financial years,
then in the current year financial statements the revenue and result of Estonia—Russia route have been presented
under “Other”. Comparative information has also been restated in the current financial year.
In financial statements of previous years, the ship leases were reported as inter-segment sales. This year the
management re-considered the classification of the lease of ships and decided that it is more appropriate to report
the revenue from lease of ships as a revenue within one segment, which is eliminated already at a segment level.
Comparative information has been also restated in the current financial year. As the result of lease of ships
amounted to zero, there is no effect of the restatement on the result of reported segments.
In the opinion of the Group’s management the prices used in inter-segment transactions do not significantly
differ from the prices used in transactions with external customers.
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