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Reconciliation of effective tax rate
A reconciliation of income tax expense applicable to accounting profit (loss) before income tax at the weighted average
statutory income tax rate of 40.42% to the Company’s effective income tax rate for the years ended is as follows:
2010 2009
Profit (loss) before income tax from continuing operations 13,355 (28,647)
Income tax using the Company’s weighted average tax rate 5,398 (5,650)
Non-deductible expenses
Current year losses for which no deferred tax asset was recognized
8,822 10,336
and changes in unrecognized temporary differences
Recognition of previously unrecognized tax losses, tax credits
(847) 20,084
and temporary differences of a prior year
Changes in previously recognized tax losses, tax credits and recognized
(397) (266)
temporary differences for changes in enacted tax rates (1,579) (5,066)
Under (over) provided in prior periods (190) (7,094)
Other – 2,861
Income tax expense reported in consolidated income statement 11,207 15,205
Income tax attributable to discontinued operations – –
Total income tax expense 11,207 15,205
The weighted average statutory income tax rate is the
average of the statutory income tax rates applicable in
the countries in which the Company operates, weighted
by the profit (loss) before income tax of the subsidiaries in
the respective countries as included in the consolidated
accounts. Some entities have losses for which no deferred
tax assets have been recognized.
During the year ended December 31, 2010, the income
tax benefits related to the current year losses of certain
US, German, and Dutch subsidiaries as well as a Dutch
joint venture were not recognized. During the year ended
December 31, 2009 the income tax benefits related to
the current year losses of certain US, German, Dutch,
UK subsidiaries and a Norwegian joint venture were
not recognized. In total, ($847) and $20,084 were not
recognized in 2010 and 2009, respectively, as it is not
probable that these amounts will be realized.
During the year ended December 31, 2010, certain income
tax benefits related to previously unrecognized tax losses
and temporary differences related to a German subsidiary
were recognized. During the year ended December 31,
2009, certain income tax benefits related to previously
unrecognized tax losses and temporary differences
related to a Brazilian subsidiary were recognized. In
total, $397 and $266 were recognized in 2010 and 2009,
respectively, through an increase to the net deferred tax
98 Notes to Consolidated Financial Statements
asset. The income tax benefits were recognized since it is
probable the amounts will be realized.
In 2009, the Canadian magnesium business was a part
of Timminco and therefore was moved to discontinued
operations. The tax effect of the 2009 discontinued
operation loss is $1,550 which is reflected in loss after tax
for the year from discontinued operations.
Also during the years ended December 31, 2010 and 2009,
the net recognized deferred tax assets (liabilities) were
adjusted for changes in the enacted tax rates in Canada,
Mexico and Germany. The net recognized deferred tax
asset/(liabilities) were also adjusted to reflect accurate tax
rates. The impact of the tax rate changes was a decrease
to income tax expense of $1,579 and $5,066 for 2010 and
2009, respectively.
There were no income tax consequences attached to the
payment of dividends in either 2010 or 2009 by AMG to its
shareholders, as no dividend payments were made.
The main factors considered in assessing the realizability
of deferred tax benefits were improved profitability, higher
forecast profitability and the indefinite carryforwards
period of the tax losses. After assessing these factors, the
Company determined that it is probable that the deferred
tax benefit of the tax losses and temporary differences will
be realized.