Annual Report 2005 (6 MB) - Lundin Petroleum

The wholly owned French companies have been consolidated for tax purposes within France from 1 January 2003. The taxation liability
of a French company can be reduced wholly or in part by the surrender of losses from another French company. Losses incurred by a
company prior to tax consolidation can only be carried forward and utilised against that company’s income indefi nitely.
During 2005 the Swedish taxation authority (Skatteverket) conducted a tax audit of Lundin Petroleum AB for the fi nancial years 2002 to
2003. The tax authorities have disallowed a portion of expenses recharged to Lundin Petroleum AB by Lundin Oil Services SA for costs
associated with services performed by the management of the Lundin Petroleum Group. As Lundin Petroleum AB is in a tax loss position,
this disallowance of the expenses reduces the tax losses carried forward but does not result in a current tax charge. The tax losses
incurred have not been recorded as deferred tax assets due to the uncertainty as to the timing of their utilisation. The tax authorities
have charged penalties on the value of the taxable eff ect of the disallowed costs amounting to TSEK 5,038.1. The company is challenging
the assessment of the penalties and the disallowance of the management costs as the company believes that they are a valid charge to
the Parent Company of the Lundin Petroleum Group and as such, Lundin Petroleum has not made a provision in the accounts for the
penalties charged.
A deferred tax benefi t for the amount of TSEK 42,028 has been accounted for directly in equity. The deferred tax liability arises on the
excess of book value over the tax value of oil and gas properties and the fair value of the derivate instruments.
Group
Group
Specifi cation of deferred tax assets and tax liabilities
Deferred tax assets
2005
2004
Unused tax loss carry forwards 172,705 361,669
Site restoration provision 68,509 27,657
Royalties 5,060 4,862
Overlift 2,785 –
Fair value of derivative instruments 45,125 406
Other deductible temporary diff erences 3,603 1,753
Deferred tax liabilities
297,788 396,347
Accelerated allowances 1,723,501 1,129,549
Fair value of derivative instruments 3,097 –
Exchange gains and losses – 30,246
Capitalised acquisition cost 8,360 6,262
Other taxable temporary diff erences 100 75
1,735,058 1,166,132
Unrecognised tax losses
The Group has Swedish and Dutch tax loss carry forwards, including tax losses in the current fi nancial year, of MSEK 420.8 which in part
are not yet assessed. The tax losses can be utilised indefi nitely. A deferred tax asset relating to the tax losses carry forward has not been
recognised as at 31 December 2005 due to the uncertainty as to the timing and the extent of their utilisation. This treatment is consistent
with the comparative year’s accounts.
NOTE 9 – OIL AND GAS PROPERTIES (TSEK)
Group
2005
> 63 <
Group
2004
Parent
Company
2005
Parent
Company
2004
Production cost pools 5,541,704 4,246,283 – –
Non-production cost pools 191,167 49,741 – –
5,732,871 4,296,024 – –