ANNUAL REPORT 06 - Bosnalijek dd

Bosnalijek d.d.Notes to financial statements for the year ended 31 December 2006(All amounts are expressed in thousands of KM)TaxationIncome tax expense represents the sum of the tax currently payable anddeferred tax.The tax currently payable is based on taxable profit for the year. Taxableprofit differs from net profit as reported in the income statement becauseit excludes items of income or expense that are never taxable ordeductible. The Company’s liability for current tax is calculated using taxrates that have been enacted or substantively enacted by the balancesheet date. Deferred tax is the tax expected to be payable or recoverableon differences between the carrying amount of assets and liabilities inthe financial statements and the corresponding tax basis used in thecomputation of taxable profit, and is accounted for using the balancesheet liability method. Deferred tax liabilities are generally recognizedfor all taxable temporary differences and deferred tax assets arerecognised to the extent that it is probable that taxable profits will beProperty, plant and equipmentProperty, plant and equipment are started at cost less accumulateddepreciation and any accumulated impairment losses. Cost includes thepurchase price and directly associated cost of bringing the asset to aworking condition for its intended use. Maintenance and repairs, replacementsand improvements of minor importance are expensed as incurred.Significant improvements and replacement of assets are capitalised.Gains or losses on the retirement or disposal of fixed assets are includedin the statement of income in the period they occur.Properties in the course of construction are carried at cost, lessimpairment loss, if any. Depreciation commences when the assets areready for their intended use. Depreciation is charged so as to write-off thecost or valuation of assets, other than land and properties underconstruction, over their estimated useful lives, using the straight-linemethod, on the following annual bases:available against which deductible temporary differences can be utilised.The carrying amount of deferred tax assets is reviewed at each balancesheet date and reduced to the extent that it is no longer probable thatsufficient taxable profit will be available to allow all or part of the asset tobe recovered.Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset realised. Deferred tax ischarged or credited in the income statement, except when it relates toitems charged or credited directly to equity, in which case the deferredtax is also dealt with in equity.2006. 2005.Buildings7 to 33 years 20 to 33 years(3% - 14.3%)(3%-5%)Machinery, equipment 3 to 15 years 3 to 7 yearsand software(6.7% - 33.3%) (14.3% - 33.3%)In 2006, the Company has reassessed the estimated useful lives for itsproperty, plant and equipment. The effect of this change on the currentand next year’s is a decrease in depreciation expense in the amount ofabout KM 2,343 thousand.Assets held under finance leases are depreciated over their expecteduseful life or, where shorter, the term of the relevant lease.60 ANNUAL REPORT 06 INDEPENDENT AUDITOR’S REPORT