10. Income tax expense
|PLN ’000||Note||Year ended
Dec 31 2013
Dec 31 2012
|Total income tax recognised in consolidated net profit or loss||(101,407)||(561,535)|
|Tax expense recognised in other comprehensive income (net), including:||22,909||75,639|
|- exchange differences on translating foreign operations||-||(13,864)|
|- cash flow hedging||23||22,945||89,717|
|- actuarial gain/(loss) relating to post-employment benefits||(36)||(214)|
For the entities operating in Poland. the current and deferred portion of income tax was calculated at the rate of 19% of the income tax base.
In the case of Norwegian subsidiary LOTOS Exploration and Production Norge AS. the marginal tax rate is 78% of the tax base, LOTOS Exploration and Production Norge AS’s activities are subject to taxation under two parallel tax systems: the corporate income tax system (28% tax rate) and the petroleum tax system (additional tax rate of 50%).
In the case of Lithuanian subsidiaries (AB LOTOS Geonafta Group), the current and deferred portion of income tax was calculated at the rate of 15%.
10.2 Corporate income tax calculated at effective tax rate and reconciliation of pre-tax profit to tax base
|PLN ’000||Year ended
Dec 31 2013
Dec 31 2012
|Income tax at 19%||(11,776)||69,605|
|Difference related to accounting for step acquisition of control
(AB LOTOS Geonafta Group) (1)
|Tax effect of tax losses incurred in the period||1,418||101|
|Tax effect of tax losses deducted in the period||(395)||(1,211)|
|Tax effect of share in profit of equity-accounted entities||191||-|
|Tax effect of the bio-component tax credit (2)||(10,935)||(5,518)|
|Adjustments disclosed in current year related to tax
for previous years
|Difference resulting from the application of tax rates other
|- Netherlands Antilles||(1)||(3)|
|Income tax expense||(101,407)||(561,535)|
(1) Data for 2012 includes accounting for the acquisition of control over UAB Manifoldas by AB LOTOS Geonafta. For more information on the transaction, see Note 6.
(2) The Group used higher tax credit than suggested by the preliminary estimates based on which the relevant deferred tax assets had been recognised. Therefore, as at December 31st 2013, the deferred tax assets related to bio-component tax credit were recognised on the basis of the full amount of tax credit left to be used in the coming years. For more information on the basis and rules for the use bio-component tax credit, see Note 30.2.
Net deferred tax assets/(liabilities) before set-off comprise the following items:
|PLN ’000||Statement of financial position||Change|
|Dec 31 2013||Dec 31 2012
|Jan 1 2012||2013||2012
|Deferred tax assets|
|Employee benefit obligations||49,561||42,715||36,701||6,846||6,014|
|Impairment losses on inventories||797||448||1,877||349||(1,429)|
|Impairment losses on property, plant and equipment and other intangible assets||127,529||100,679||40,995||26,850||59,684|
|Impairment losses on YME field assets||710,083||806,962||165,741||(96,879)||641,221|
|Negative fair value of derivative financial instruments||13,734||28,905||35,671||(15,171)||(6,766)|
|Exchange differences on revaluation of foreign-currency denominated items||6,446||80||320||6,366||(240)|
|Impairment losses on receivables||16,200||15,693||17,767||507||(2,074)|
|Provisions for decommissioning of oil and gas facilities and land reclamation||188,828||28,086||20,746||160,742||7,340|
|Unrealised margin assets||8,545||3,120||2,382||5,425||738|
|Tax loss carried forward||1,145,075||986,442||769,794||158,633||216,648|
|Bio-component tax credit||4,463||10,934||15,752||(6,471)||(4,818)|
|Cash flow hedge accounting||-||8,633||98,350||(8,633)||(89,717)|
|Deferred tax liabilities|
|Difference between the current tax value
and carrying amount of property, plant and equipment and intangible assets
|Positive fair value of derivative financial instruments||140||2,159||6,088||(2,019)||(3,929)|
|Exchange differences on translating foreign operations recognised in equity||-||-||13,864||-||(13,864)|
|Exchange differences on revaluation of foreign-currency denominated items||-||34,605||6,312||(34,605)||28,293|
|Tax liabilities associated with the acquired exploration and production licences in Lithuania||57,537||64,736||54,296||(7,199)||10,440|
|Cash flow hedge accounting||14,312||-||-||14,312||-|
|Net deferred tax assets/(liabilities)||698,977||798,441||294,902||(99,464)||503,539|
|Change in deferred tax assets and liabilities disclosed in the statement of financial position||(99,464)||503,539|
|Reconciliation of differences between the change in deferred tax assets and liabilities disclosed in the statement of financial position and the deferred tax disclosed in the statement of comprehensive income|
|Exchange differences on translating deferred tax of foreign operations||122,175||11,651|
|Effect of accounting for the acquisition price of the Heimdal assets (1)||13||138,115||-|
|Deconsolidation (LOTOS Tank Sp. z o.o.) (2)||143||-|
|Deferred tax disclosed as a result of accounting for step acquisition of control (AB LOTOS Geonafta Group) (3)||-||24,299|
|Deferred tax disclosed under other comprehensive income, net||10.1||22,909||75,639|
|Deferred tax expense recognised in net profit or loss||183,878||615,128|
(1) Accounting for the tax due resulting from pro and contra cash flows generated in the transitional period, which are a part of the cost of Heimdal assets, by decreasing the tax asset relating to tax losses.
(2) For more information on the transaction, see Note 2.
(3) For more information on the transaction, see Note 6.
As the Group entities are separate taxpayers, deferred tax (deferred tax assets and liabilities) is assessed separately by each entity. The Group entities offset deferred tax assets and deferred tax liabilities. The table below presents the deferred tax disclosed in the consolidated statement of financial position:
|PLN ’000||Dec 31 2013||Dec 31 2012
|Deferred tax assets||980,284||1,121,314|
|Deferred tax liabilities||(281,307)||(322,873)|
|Net deferred tax assets (liabilities)||698,977||798,441|
Taxable temporary differences are expected to expire in 2014–2083.
As at December 31st 2013, the tax losses with respect to which no deferred tax assets were recognised in the statement of financial position were PLN 33,960 thousand (December 31st 2012: PLN 43,101 thousand ). The decrease in the amount of the above tax losses in 2013 is a result of their partial settlement, as well as the loss of deduction right due to expiry of the period when the tax losses could be settled in accordance with the tax regulations.