77 - a deferred tax liability should be recognised for any taxable temporary differences between the book value of an asset or liability on the balance sheet and its tax base, except insofar as the deferred tax liability is generated by: - initial recognition of goodwill; - initial recognition of an asset or liability in a transaction that is not a business combination and that does not affect either the accounting or taxable profit (tax loss) at the transaction date; - 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 differences may 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 calculation of deferred tax takes into account tax rates in each country and does not need to be discounted. The Monegasque reinvestment regime (suspension of taxes on capital gains made on the disposal of fixed assets): Deferred tax liabilities are recognised in accordance with Article 10 of Sovereign Ordinance no. 3.152 dated 19 March 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 the company 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 from the 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. When unrealised gains on securities are taxable, they do not generate any taxable temporary differences between the book value of the asset and the tax base. As a result, deferred tax is not recognised on these gains. When the securities concerned are classified as financial assets at fair value through other comprehensive income, unrealised gains and losses are recognised directly through other comprehensive income. Therefore, by symmetry, the actual tax charge or saving borne by CFM Indosuez Wealth in respect of these unrealised capital gains or losses is reclassified as a deduction from shareholders' equity. For leases recorded under IFRS 16 where the Group is lessee, a deferred tax liability is recognised for the right to use the asset and a deferred tax asset is recorded for the lease liability Current and deferred tax is recognised in net income for the financial year, except insofar as the tax is generated: - either by a transaction or event that is recognised directly in other comprehensive income, in the same year or in a different year, in which case it is directly debited from or credited to other comprehensive income; - or from a business consortium. Deferred tax assets and liabilities are offset if, and only if: - CFM Indosuez Wealth has a legally enforceable right to offset current tax assets and liabilities; and - deferred tax assets and liabilities relate to income taxes levied by the same tax authority, either on the same taxable entity or on different taxable entities, which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered. Tax risks relating to income tax result in the recognition of a current tax receivable or liability when the probability of receiving the asset or paying the liability is considered more likely than not. These risks are also taken into account in the valuation of current and deferred tax assets and liabilities. IFRIC 23 on measuring uncertain tax positions applies when an entity has identified one or more uncertainties about tax positions taken in respect of its taxes. It also provides details of their estimates: - the analysis must be based on 100% detection by the tax authorities; - the tax risk must be recognised as a liability when it is more likely than not that the tax authorities will call into question the treatment adopted, for an amount reflecting Management's best estimate; - if there is more than a 50% probability of repayment by the tax authorities, a receivable must be recognised. TREATMENT OF NON-CURRENT ASSETS (IAS 16, 36, 38 AND 40) The Crédit Agricole group applies component accounting for all its property, plant and equipment. In accordance with the provisions of IAS 16, the depreciable amount takes account of the potential residual value of property, plant and equipment. Land is recorded at acquisition cost, less any impairment. Operating and investment properties and their fittings and fixtures are recorded at acquisition cost less depreciation and impairment since they entered service.
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