Download 2004 Annual Report - Polymetal

Note 24Income TaxThe income tax expense consists of the following:Year ended December 312004Year ended December 312003Current tax expense 3 414 58Change in deferred tax assets (4 667) (3 007)Net change in valuation allowance 4 331 (2 460)Change in deferred tax liability 8 199 4 542Less deferred tax liability charged to accumulated translation adjustment − (2 296)Income tax expense (benefit) 11 277 (3 163)The actual tax expense (or taxcredit) differs from the amountwhich would have beeen determinedby applying the statutory rate of24 % (2003: 24 %) to the incomefrom continuing operations beforetaxes and minority interest as a re−sult of the application of Russian taxregulations, which disallow certaindeductions which are included in de−termination of income before taxesunder U.S. GAAP (social related ex−penditures and other non−produc−tion costs, certain general, adminis−trative, financing, foreign exchangerelated and other costs). At thesame time certain gains and rev−enues recognized under U.S. GAAPmay represent nontaxable income(gain on disposal of subsidiary).The components of deferred tax assets and liabilities were as follows:December 312004December 312003Deferred tax asset:Property, plant and equipment − (1 240)Intangible assets (15) (32)Accounts payable (263) (248)Provisions (280) (396)Inventory – production materials and work in progress (7 034) (3 114)Tax losses carried forward (7 572) (5 467)Total deferred tax asset (15 164) (10 497)Valuation allowance 9 361 5 030Total net deferred tax asset (5 803) (5 467)Deferred tax liability:Property, plant and equipment 5 753 −Accounts receivable 8 160 3 826Inventory – Finished goods − (408)Translation effect in the cost of property, plant and equipment − 2 296Deferred tax liability on property, plant and equipment 4 430 −Total deferred tax liability 18 343 5 714A valuation allowance of U.S. Dollar 9361 (2003: U.S. Dollar 5 030) hasbeen provided for due to the uncer−tainties of realizing deferred taxassets, other than those arisingfrom tax losses carried forward,in the future. Tax losses carriedforward are amounts, which will beoff−set against future taxable prof−its by Serebro “Territorii”, SerebroMagadana and Okhotskaya GGCduring the period up to year 2010.Each legal entity within the Grouprepresent a separate tax−payingcomponent for income tax purpos−es. Tax losses at one entity cannotbe used to reduce taxable incomeof other entities in the Group.Appendix #1: Consolidated financial statements67