CFM INDOSUEZ Wealth Management - 2020 Annual Report

71 Defined contribution plans Companies with employees contribute to various mandatory pension schemes. The funds are managed by independent organisations and the contributing companies have no legal or implied obligation to pay additional contributions if the funds do not have enough assets to cover all the benefits corresponding to the services rendered by the staff during the fiscal year and prior fiscal years. As a result, CFM IndosuezWealth Group has no liability other than the contributions payable for the past financial year. Other long-term benefits Other long-term benefits are benefits to be paid to employees, other than retirementbenefitsandtermination benefits, but not fully payable within twelve months following the end of the year inwhich the related services were rendered. This includes bonuses and other deferred compensation paid twelve months or more after the end of the year in which they were earned, but which are not tied to shares. The valuationmethod is similar to that used by the Group for retirement benefits in the defined benefit category. Current and deferred taxes In accordance with IAS 12, income tax includes all taxes on income, whether due or deferred. The standard defines the tax payable as “the amount of income tax payable (recoverable) for taxable profit (loss) for a financial year.” Taxable profit is the profit (or loss) of a given period according to the rules established by tax authorities. The ratesand rulesapplicable todetermine the taxpayable are those ineffect ineachcountrywhereGroupcompanies are established. The taxpayable includesany income tax, dueor receivable, of which the payment is not contingent upon the completion of future transactions, even if the payment is spread over several financial years. The tax payablemust be recognised as a liability, insofar as it is not paid. If the amount already paid in respect of the fiscal year and previous fiscal years exceeds the amount due for those fiscal years, the surplus must be recognised as an asset. In addition, certain transactions carried out by the entity may have tax consequences that are not taken into account in determining the tax payable. The differences between the book value of an asset or liability and its tax base are classified in IAS 12 as temporary differences. The standard requires the recognition of deferred taxes in the following cases: • adeferred tax liabilitymust be recognised for all taxable temporary differences between the book value of an asset or liability on the balance sheet and its tax base, except to the extent that the deferred tax liability is generated by the initial recognition of an asset or liability in a transaction that is not a business combination and does not impact accounting profit or taxable profit (tax loss) as of the date of the transaction. • a deferred tax asset must be recognised for all deductible temporary differences between the book value of an asset or liability in the balance sheet and its tax base, to the extent that it is considered likely that a taxable profit, against which such deductible temporary differencesmay be offset, will be available; • a deferred tax asset must also be recognised for the carry forward of tax losses and unused tax credits to the extent that it is likely that future taxable profits will be available against which such tax losses and unused tax credits may be offset. The tax rates for each country are applied as appropriate. The calculation of deferred taxes is not discounted. The Monegasque reinvestment regime (suspension of taxes on capital gains made on the disposal of fixed assets): Deferred tax liabilities are recognised in accordancewith Article 10 of SovereignOrdinance no. 3 152 dated 19March 1964: • capital gains realised by a Monegasque taxpaying company on the sale of operating fixed assets are not included in taxable profits for the year in which they are realised if thecompany undertakes to reinvest an amount equal to the capital gain plus the cost price of the assets sold in fixed assets within three years of the end of the year in question. • The capital gains excluded from taxable profits are considered as being allocated to the depreciation of new fixed assets and are deducted fromthe cost price when calculating depreciation and capital gains realised at a later date. The difference between the book value of the new fixed assets and their taxable value meets the definition of “temporary difference” under IAS 12 and justifies the recognition of a deferred tax liability. Unrealised capital gains on securities, when they are taxable, do not generate taxable temporary differences between the book value of assets and the tax base. They do not, therefore, give rise to the recognition of deferred taxes. When the relevant securities are classified as financial assets at fair value through equity, unrealised gains and losses are offset against equity. As a result, the tax expense or the actual tax saving borne by the entity on these unrealised gains or losses is reclassified as a deduction from them.