Report & Accounts - JLT

c) Income taxesThe Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwideprovision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertainduring the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initiallyrecorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination ismade.d) Pension obligationsThe present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using anumber of assumptions. The assumptions used in determining the net cost (income) for pensions include the expected long-termrate of return on the relevant plans’ assets and the discount rate. Any changes in these assumptions will impact the carryingamount of pension obligations.The expected return on plan assets assumption is determined on a uniform basis, taking into consideration long-term historicalreturns, asset allocation and future estimates of long-term investment returns. The Group determines the appropriate discount rateat the end of each year. This is the interest rate that should be used to determine the present value of estimated future cashoutflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the Groupconsiders the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid,and that have terms to maturity approximating the terms of the related pension liability. Other key assumptions for pensionobligations are based in part on current market conditions.e) Errors and omissions liabilityDuring the ordinary course of business the Group can be subject to claims for errors and omissions made in connection with itsbroking activities. A balance sheet provision is established in respect of such claims when it is probable that the liability has beenincurred and the amount of the liability can be reasonably estimated. The Group analyses its litigation exposures based on availableinformation, including external legal consultation where appropriate, to assess its potential liability.Financial Statements Jardine Lloyd Thompson Group plc Annual Report & Accounts 200557