eurochem-annual-report-2011

Financial information
Notes to the consolidated financial statements continued
for the year ended 31 December 2011
(all amounts are presented in thousands of Russian Roubles, unless otherwise stated)
26 Income tax
2011 2010
Income tax expense – current 8,322,851 4,699,114
Prior periods adjustments recognised in the current period for income tax (471,373) –
Deferred income tax – (recognition)/reversal of temporary differences 211,392 259,585
Effect of the change in the tax rate 5,899 –
Income tax expense 8,068,769 4,958,699
During the year ended 31 December 2011 the Group offset VAT and other tax receivables against income tax payables of RR 35,861 thousand
(2010: RR 187,607 thousand).
The profit before taxation for financial reporting purposes is reconciled to the tax expense as follows:
2011 2010
Profit before taxation 40,100,162 25,011,176
Theoretical tax charge at statutory rate of 20% (2010: 20%) (8,020,032) (5,002,235)
Tax effect of items which are not deductible or assessable for taxation purposes:
– Non deductible expenses (344,662) (372,333)
– Effects of tax rates different to 20% 111,949 667,420
– Unrecognised tax loss carry forward for the year (135,483) (251,551)
– Effect of the change in the tax rate (5,899) –
– Reassessment of deferred tax assets/liabilities (146,015) –
Prior periods adjustments recognised in the current period for income tax 471,373 –
Consolidated tax charge (8,068,769) (4,958,699)
The majority of the Group companies were subject to a tax rate of 20% on taxable profits in the Russian Federation during the year ended 31 December 2011
(2010: 20%).
The tax rates of two subsidiaries operating in the Russian Federation were reduced:
• effective from 1 January 2011, the tax rate applying to OJSC Novomoskovskiy Azot was reduced to 18.3% (2010: 20%) according to the regional tax law;
• effective from 1 September 2011, the tax rate applying to LLC PG Phosphorit was reduced to 15.5% (2010: 20%) according to an agreement with a regional
authority signed in August 2011.
As at 31 December 2011 deferred tax assets and liabilities of these subsidiaries were calculated at the reduced income tax rates which are expected to apply
during the period covered by the agreement and any subsequent extension.
At 31 December 2011 the Group had RR 1,871,768 thousand (31 December 2010: RR 820,634 thousand) of accumulated tax losses carried forward and
recognised deferred tax assets of RR 1,425,721 thousand (31 December 2010: RR 510,070 thousand). The Group did not recognise deferred tax assets
of RR 446,047 thousand (31 December 2010: RR 310,564 thousand) because it is not probable that future taxable profit will be available against which the
Group can utilize such benefits.
The Group has not recognised a deferred tax liability in respect of temporary differences associated with investments in subsidiaries of RR 62,961,581 thousand
(31 December 2010: RR 57,325,555 thousand). The Group controls the timing of the reversal of these temporary differences and does not expect to reverse
them in the foreseeable future.
104 EuroChem Annual Report and Accounts 2011