CONTENTS - Capgemini

Reconciliation of the acquisition cost of property, plant and equipment in the balance sheet with the amount reported in the cash
flow statement
The acquisition cost of property, plant and equipment reported in the balance sheet (€131 million) is different from the figure provided in
the cash flow statement (€72 million), which excludes transactions with no cash impact (i.e., acquisitions of assets held under finance leases
amounting to €59 million in 2006).
NOTE 13 – DEFERRED TAXES
I. RECOGNIZED DEFERRED TAX ASSETS AND LIABILITIES
A) Analysis by recovery date
At December 31 (in millions of euros) 2004 2005 2006
Deferred tax assets:
– Deferred tax assets recoverable over one year 705 737 761
– Deferred tax assets recoverable within one year 73 91 127
TOTAL DEFERRED TAX ASSETS
Deferred tax liabilities:
778 828 888
– Deferred tax liabilities payable over one year 75 105 108
– Deferred tax liabilities payable within one year 20 16 10
TOTAL DEFERRED TAX LIABILITIES 95 121 118
Deferred tax assets at December 31, 2004 and 2005 have been restated in line with the amended IAS 19 (see Note 2 – “Change in
accounting method”).
B) Changes in recognized deferred taxes
in millions of euros
Deferred tax
assets arising
from tax loss
carry-forwards
Deferred tax
assets arising
from the
acquisition
of Ernst
& Young’s
consulting
business
Deferred tax
assets arising
from temporary
differences
Total
deferred
tax assets
Total
deferred
tax liabilities
(1)
At January 1, 2006 583 140 105 828 (121) 707
Translation adjustments - (15) (3) (18) 5 (13)
Deferred taxes recognized in profit or loss 5 - 31 36 - 36
Deferred taxes recognized in equity - - 45 4 (2) 43
Other movements (5) - 2 (3) - (3)
At December 31, 2006 583 125 180 888 (118) 770
(1) Deferred tax liabilities relate to temporary differences.
The breakdown of deferred taxes recognized in profit or loss (€36 million)
is provided in Note 9 – “Income tax expense”.
Deferred tax income recorded in equity (€43 million) essentially
relates to actuarial gains and losses recognized in equity. The change
reflects the end-2006 recognition in the United Kingdom of €52 million
in tax assets on actuarial losses (see below, “Deferred tax assets
arising from temporary differences in the United Kingdom”), as well
as €8 million in actuarial gains for the year recorded in Canada.
Deferred tax assets arising from the acquisition of Ernst &
Young’s consulting business in North America
The difference between the acquisition price of Ernst & Young’s
North American consulting business and the tax base of the assets
and liabilities acquired (€3,034 million at December 31, 2006) is
amortized over 15 years for tax purposes, representing an income
tax saving of around €1,183 million based on current tax rates. Over
Total,
net
recent fiscal years, these amortization charges have led to an increase
in tax losses generated by North American operations that may be
carried forward over a period of 20 years. In view of the above, the
Group has potential tax savings available in the form of tax losses and
tax-deductible future amortization allowances that may be utilized
up to 2034 under current regulations.
The value of the related deferred tax asset is reviewed based on an
estimate of the taxable profit of the Group’s North American operations
over the next five years using growth and profitability rates
considered reasonable.
At December 31, 2006, the value of the deferred tax asset recognized
in North America is €125 million.
Deferred tax assets arising from tax loss carry-forwards in France
In 2002, Cap Gemini S.A. recognized a €2.8 billion net short-term
capital loss for tax purposes, further to the reorganization of the
Group’s North American operations. Since December 31, 2003, the
ANNUAL REPORT 2006 Capgemini
87