2012 Annual Report - ZTE

ANNUAL REPORT 2012Notes to Financial Statements (continued)(Prepared in accordance with PRC ASBEs)(All amounts in RMB’000 unless otherwise stated)(English translation for reference only)V. EXPLANATORY NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS(continued)17. Deferred tax assets/liabilities (continued)Temporary differences in items of assets or liabilities:Deductible temporary differences2012 2011Unrealized profits arising on consolidation 483,076 313,159Provision for inventory impairment 1,143,864 1,074,135Foreseeable contract losses 193,877 160,242Capitalization of deferred development costs 411,818 254,430Provision for maintenance and returned goods 246,692 347,610Provision for retirement benefits 54,041 48,716Accruals 1,187,364 780,531Overseas taxes pending deduction 1,257,267 1,469,786Taxable temporary differences4,977,999 4,448,609Appreciation of fixed assets, construction in progress and land userights upon valuation 932,669 —Note According to the Enterprise Income Tax Law of the People’s Republic of China and the Implementation Regulations forEnterprise Income Tax of the People’s Republic of China which took effect on 1 January 2008, dividend income payable tooverseas investors derived from profit of PRC subsidiaries generated after 1 January 2008 is subject to a 10% withholdingtax, or 5% for companies incorporated in Hong Kong. As at 31 December 2012, the Group did not recognize income taxliabilities in respect of tax obligations arising from future distribution of the retained profits of the subsidiary Xi’an ZhongxingSoftware Company Limited, because the Group controlled the dividend policies of these subsidiaries and was of the viewthat profit generated in the relevant periods would not be available for distribution in the foreseeable future.229