iesy Repository GmbH - Irish Stock Exchange

Deferred Taxes
Under German GAAP, deferred income taxes are provided for timing differences, which are expected to reverse in the
future. Timing differences result from when revenues and expenses are recorded in the income statement and when they are
recorded in the German tax return. A valuation allowance on deferred tax assets is required, if it is not sufficiently probable
that the tax benefits from the deferred tax assets can be recovered. There is no requirement to capitalize deferred tax assets on
net operating losses.
Under U.S. GAAP a provision for deferred taxes under the liability method is required in full for all temporary
differences. Deferred tax assets are recognised in full with valuation allowances provided where it is considered more likely
than not that some portion of the deferred tax asset will not be realized.
Pension Obligations
Under German GAAP, pension obligations are generally based on the present value method as defined by German tax
law, whereby among other items, probable future salary and contribution increases are not taken into consideration. German
tax law also requires pension provisions to be calculated using discount rates established under German law, which is often
applied by companies for its financial statements.
Under U.S. GAAP, pension obligations are calculated using the projected unit credit method, which attributes benefits
based on the employee’s estimated future compensation levels. In addition, the company is required to record a minimum
pension liability to the extent that the pension plan has an unfunded accumulated pension obligation, which is calculated on
all years of service performed by the employees under the pension plan, both vested and non-vested, using current salary
levels. Actuarial gains or losses outside of a 10% “corridor” must be immediately recognized as a component of net pension
cost; gains and losses inside the corridor can be amortized over future periods.
Accrued Liabilities and Contingencies
Under German GAAP, companies record losses for liabilities related to certain contingencies when the assessment of a
liability is based on prudent business judgment, without having the contingency meet a probability threshold. In addition, a
company may accrue in the current accounting period, costs to be incurred in future accounting periods, when management
intends to incur those costs, such as establishing an accrual for future committed maintenance costs.
Under U.S. GAAP, liabilities for contingencies are recorded if a loss is probable to occur, the amount of the loss can be
reasonably estimated and the event occurred in the current financial statement period.
Restructuring Activities
Under German GAAP, the estimated costs of restructuring activities must be accrued when the costs of the
restructuring plan can be properly estimated.
Under U.S. GAAP, a liability for costs associated with restructuring activities is recognized and initially measured at
fair value when the liability is incurred. A liability is incurred when the following conditions are met (a) the restructuring
plan is based on a present duty or responsibility to one or more third parties that requires settlement by probable future
sacrifice of company assets at a specified or determinable date, (b) the restructuring plan obligates the company, leaving it
little or no discretion to avoid the future sacrifice, and (c) the restructuring plan obligating the company has already
happened.
Asset Retirement Obligations
Under German GAAP, the costs expected to be incurred with respect to the asset retirement obligation are also fully
recorded with the recognition of an asset or accrued pro rata over the useful life of the asset.
Under U.S. GAAP, asset retirement obligations are included in the historical cost of property, plant and equipment at
their fair market value if the obligation satisfies specific criteria, at the same time the asset is established an equal liability is
recorded. The asset amount recorded in the historical cost is amortized over the useful life of the asset, the corresponding
liability is accreted to the expected payment amount through a change to expense.
Debt Issuance Costs
Under German GAAP, costs incurred in connection with the issuance of debt obligations are generally expensed as
incurred.
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