Pharmaceuticals Sector - Solvay

and the estimated fi nancial consequences of US and European legal proceedings relating to the respecting of
competition rules in the peroxides area prior to 2001.
The remaining expenses relate mainly to redundancy schemes and the miscellaneous costs of site restructurings
and closures in Europe, the United States and Asia.
(10) Charges on net indebtedness
EUR million 2004 2005
Cost of borrowings -119 -120
Interest on lending and short-term deposits 34 36
Other -4 -1
Charges on net indebtedness -89 -85
Charges on net indebtedness have decreased from EUR 89 million in 2004 to EUR 85 million in 2005. Average net
indebtedness remains unchanged at around EUR 1 200 million. This fall refl ects higher income from cash and cash
equivalents (including swap earnings), despite a slight fall of around EUR 150 million in the average treasury position
following the use of available cash and cash equivalents in July to fi nance the acquisition of the Fournier group. This
development is linked mainly to higher interest rates, in particular for USD, in which a signifi cant portion of excess
cash is held.
(11) Income taxes
Tax charges on income
As is right and proper, the tax charges on income do not include taxes on discontinued operations. 2004 data have
been restated to permit comparison.
Components of the tax charge
The tax charge on income consists of current tax and deferred tax.
Current tax represents the tax paid or payable (recovered or recoverable) in respect of the taxable profi t (tax loss)
for the past year, as well as any adjustments to tax paid or payable (recovered or recoverable) in relation to previous
years. Deferred tax represents the tax which will be owed (or recovered) during future years, but which has already
been recognized during the past year, and which corresponds to the variation in the deferred tax items recorded in
the balance sheet (see below).
The deferred tax charge referring to items accounted for under shareholders’ equity is also recorded in this latter
item.
The tax charge breaks down as follows:
EUR million 2004 2005
Current taxes related to current year -160 -172
Current taxes related to prior years -17 29
Deferred income tax before valuation allowance 16 7
Valuation allowance on deferred tax assets (-/+) 32 -17
Tax effect of changes in the nominal tax rates on deferred taxes 4 0
Total -125 -153
EUR million 2004 2005
Income tax on items allocated directly to equity 13 2
Total 13 2
Solvay Global Annual Report 2005
69