CONTENTS - Capgemini

78 ANNUAL
GROUP CONSOLIDATED FINANCIAL STATEMENTS
Capgemini
NOTE 8 – OTHER FINANCIAL INCOME AND EXPENSE, NET
Other financial income and expense, net consists of:
in millions of euros 2004 2005 2006
Remeasurement of financial instruments at fair value 3 2 5
Capital gains on the sale of investments in non-consolidated companies 18 3 -
Exchange gains and other 6 4 8
TOTAL OTHER FINANCIAL INCOME 27 9 13
Remeasurement of financial instruments at fair value (3) (2) (9)
Impairment of investments in non-consolidated companies - (3) -
Net interest cost on defined benefit plans (1) (9) (8) (9)
Expenses related to the measurement of financial liabilities in accordance
with the amortized cost method
(5) (4) (3)
Exchange losses and other (9) (6) (10)
TOTAL OTHER FINANCIAL EXPENSES (26) (23) (31)
TOTAL OTHER FINANCIAL INCOME AND EXPENSE, NET 1 (14) (18)
(1) See Note 19 – “Provisions for pensions and other post-employment benefits”.
The changes in this caption are primarily attributable to:
Between 2004 and 2005: the impact of the €18 million capital
gain on the sale of the Group’s non-consolidated stake in Vertex
in 2004;
NOTE 9 – INCOME TAX EXPENSE
Income tax expense can be analyzed as follows:
REPORT 2006 Capgemini
Between 2005 and 2006: changes in the market value of the interest
rate swap relating to the June 24, 2003 convertible/exchangeable
bond issue (“OCEANE 2003”). This generated €1 million in financial
income in 2005, compared to financial expense of €5 million
during 2006.
in millions of euros 2004 2005 2006
Current income taxes 11 (34) (49)
Deferred income taxes (237) (1) 36
TOTAL (226) (35) (13)
Current income tax expense for 2006 comprises:
€39 million in income taxes on profits, chiefly relating to the
Netherlands, Germany and India.
€10 million in taxes not based on taxable income, mainly related
to North America and Italy.
Net deferred tax income for 2006 primarily reflects:
deferred tax assets recognized on temporary differences and tax
loss carry-forwards arising in previous years and in 2006 (€94
million), due to an improved profitability in various countries
over the past two years and to future growth expectations. This
recognition concerns France (€40 million, see Note 13 – “Deferred
taxes”), the United Kingdom (€32 million, see Note 13 – “Deferred
taxes”), Germany (€22 million), Norway (€8 million), and €8 million
reversals of temporary differences in several countries.
A total expense of €58 million related to the utilization of deferred
tax assets on tax loss carry-forwards previously recognized in
balance sheet due to taxable net income for the period. Of this
amount, €43 million concern France.
In 2006, the Group’s average effective rate of income tax was 4.2%
of pre-tax profit. The effective rate of income tax in 2006 is also
significantly affected by the recognition of deferred tax assets arising
from temporary differences and tax loss carry-forwards available
to the Group. As the Group operates in countries with different
tax regimes, the effective rate of income tax varies from one year
to the next based on changes in each country’s contribution to
consolidated profit.