Annual Report 2007 - hci hammonia shipping ag

The Company Management Report Financial Statements Notes(f) InventoriesInventories relate to lubricants held on board of seagoing vessels. The amount of inventories is determinedon the basis of a physical inventory stocktaking as at the balance sheet date. The inventories aremeasured at the lower of cost and net realisable value.If the reasons that resulted in an impairment of inventories no longer apply, the impairment loss isreversed.(g) Other provisionsProvisions are recognised whenever an obligation currently exists towards third parties as a result of apast event, and when the obligation is likely to result in a future outflow of resources that can be reliablyestimated. If a provision could not be recognised due to the fact that one of the above criteria was notmet, the related obligations have to be disclosed under contingent liabilities unless the probability thatpayment will be required is very low. Provisions for obligations are discounted when these obligationswill probably not result in an outflow of resources in the subsequent year. The carrying amount of theprovisions is reviewed on each balance sheet date.(h) Income taxesCurrent taxes are expensed as incurred at the amounts owed by the Group.Deferred taxes are recognised to account for future tax effects resulting from temporary differencesbetween the tax base of assets and liabilities and their related carrying amounts in the IFRS financialstatements, as well as on loss carryforwards. The measurement of deferred taxes is based on the taxlaws enacted at the end of the relevant financial year, and applicable to the financial years in which thedifferences reverse or loss carryforwards are probably utilised. Deferred tax assets on temporary differencesor tax loss carryforwards are only recognised to the extent that their recoverability is sufficientlycertain.Deferred taxes are recognised for temporary differences resulting from the fair value measurement ofassets and liabilities within the scope of acquisitions of companies. Deferred taxes for temporary differenceson goodwill as part of subsequent measurement are only recognised when goodwill is taxdeductible.Loss carryforwards are not taken into account in the determination of deferred tax assets in the contextof earnings contributions covered by taxation in accordance with Section 5a of the German Income TaxAct (Einkommensteuergesetz, EStG) (tonnage tax) within the framework of the separate and uniformdetermination of taxable income of the single-ship companies.As a result of the tonnage tax, differences between the tax base of assets and liabilities and their carryingamounts in the IFRS financial statements occurring at the shipping limited partnerships, are consideredpermanent differences.The carrying amount of deferred tax assets is re-assessed at each balance sheet date, and reduced tothe extent that it is no longer probable that sufficient taxable income will be available against which thedeferred tax asset can be partially utilised.Deferred tax assets and liabilities are netted if the Company has a legally enforceable right to set off currenttax assets against current tax liabilities, and the deferred taxes refer to income taxes of the sametaxable entity and levied by the same tax authority.46