34. Assets and liabilities for deferred income tax

Assets and liabilities for deferred income tax are calculated for all temporary differences in accordance with the balance sheet method, using an effective income tax rate of 19% in 2014 and 2013.

Assets and liabilities for deferred income tax are not recognised as short term assets and liabilities.

Changes in assets and liabilities for deferred income tax are presented below.

 

 
Deferred income tax assets As at 01.01.2014 Recognised in
the income
statement
Recognised in
other
comprehensive
income
Other changes As at 31.12.2014
Interest 105 053 (28 198) - - 76 855
Valuation of derivative financial instruments 27 103 (24 504) - - 2 599
Valuation of investment securities 9 058 15 349 - (387) 24 020
Provisions for impairment of loans and advances 194 482 39 704 - - 234 186
Provisions for employee benefits 33 548 2 657 447 (352) 36 300
Other provisions 8 830 1 434 - (1 416) 8 848
Prepayments/accruals 23 730 2 965 - (1 060) 25 635
Tax losses carried forward 16 245 (9 800) - - 6 445
Differences between carrying and tax value of lease 118 806 38 998 - - 157 804
Other negative temporary differences 77 497 (3 713) (4) (918) 72 862
Total deferred income tax assets 614 352 34 892 443 (4 133) 645 554
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Deferred income tax liabilities As at 01.01.2014

Recognised in the income statement

Recognised in other
comprehensive income
Other changes As at 31.12.2014
Interest (44 502) (13 496) - - (57 998)
Valuation of derivative financial instruments (6 173) (25 000) (952) - (32 125)
Valuation of investment securities (93 616) (1 113) (64 492) 848 (158 373)
Interest and fees received in advance (35 767) (4 844) - - (40 611)
Difference between tax and book value of tangible and intangible assets (34 613) (12 546) - 314 (46 845)
Prepayments regarding amortization of applied investment relief (18 657) - - - (18 657)
Other positive temporary differences (13 157) (16 567) 4 1 406 (28 314)
Total deferred income tax liabilities (246 485) (73 566) (65 440) 2 568 (382 923)
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Deferred income tax assets As at 01.01.2013 Recognised in the
income statement
Recognised in
other
comprehensive
income
Other changes As at 31.12.2013
Interest 70 607 34 446 - - 105 053
Valuation of derivative financial instruments 137 000 (109 897) - - 27 103
Valuation of investment securities 20 736 (11 678) - - 9 058
Provisions for impairment of loans and advances 222 228 (27 746) - - 194 482
Provisions for employee benefits 34 652 (1 270) 166 - 33 548
Other provisions 7 635 1 195 - - 8 830
Prepayments/accruals 29 128 (5 398) - - 23 730
Tax losses carried forward 3 722 12 523 - - 16 245
Differences between carrying and tax value of lease 116 104 2 702 - - 118 806
Other negative temporary differences 95 541 (17 338) - (706) 77 497
Total deferred income tax assets 737 353 (122 461) 166 (706) 614 352
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Deferred income tax liabilities As at 01.01.2013

Recognised in the income statement

Recognised in
other comprehensive
income

Other changes As at 31.12.2013
Interest (50 461) 5 959 - - (44 502)
Valuation of derivative financial instruments - (6 173) - - (6 173)
Valuation of investment securities (162 623) 24 525 44 482 - (93 616)
Interest and fees received in advance (38 339) 2 572 - - (35 767)
Difference between tax and book value of tangible and intangible assets (25 680) (8 933) - - (34 613)
Prepayments regarding amortization of applied investment relief (18 657) - - - (18 657)
Other positive temporary differences (52 073) 38 825 - 91 (13 157)
Total deferred income tax liabilities (347 833) 56 775 44 482 91 (246 485)
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Deferred income tax included in the income statement 31.12.2014 31.12.2013
Interest (41 694) 40 405
Valuation of derivative financial instruments (49 504) (116 070)
Valuation of securities 14 236 12 847
Provisions for impairment of loans and advances 39 704 (27 746)
Provisions for employee benefits 2 657 (1 270)
Other provisions 1 434 1 195
Prepayments/accruals 2 965 (5 398)
Interest and fees received in advance (4 844) 2 572
Difference between tax and book value of tangible and intangible assets (12 546) (8 933)
Differences between carrying and tax value of lease 38 998 2 702
Tax losses carried forward (9 800) 12 523
Other temporary differences (20 280) 21 487

Total deferred income tax included in the profit and loss account (Note 14)

(38 674) (65 686)
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In calculation of deferred tax asset the Group has taken into account tax losses incurred by foreign branch in Czech Republic in years 2009-2011, in the part in which they have been not settled in 2014. The tax losses incurred by foreign branch in Slovakia were not taken into account by the Bank in this calculation. Including losses of Czech branch and excluding losses of Slovak branch in deferred tax asset calculation resulted from assessment of the tax base in the current year and in the subsequent fiscal years (including the periods scheduled for settlement of tax losses), in the Czech Republic and Slovakia, respectively. On the basis of adopted financial projections and the level of tax base for 2014 it could be stated that in the case of: (i) losses of the Czech branch - reaching the tax base making it possible to deduct the tax losses or a higher tax base is probable, (ii) losses of the Slovak branch - reaching the tax base making it possible to offset negative temporary differences and deduct tax losses is not probable. Right to tax losses’ settlement expires between 2015 and 2016 year.

Due to the improbability of occurrence of taxable income enabling to use tax losses incurred in Garbary Sp. z o.o. and BDH Development Sp. z o.o., the Group does not include those losses in the deferred tax asset calculation. The total amount of unused tax losses not included in the calculation of deferred tax assets amounted to PLN 67 823 thousand at the end of 31 December 2014 and PLN 67 380 thousand at the end of 31 December 2013. Right to tax losses’ settlement expires between 2015 and 2019 year.

The Group recognizes deferred tax liabilities or assets related to temporary differences arising from investments in subsidiaries and associates except that the implementation of the temporary differences is controlled by the Group and it is probable that in the foreseeable future, these differences will not be reversed. At the end of 2014 the Group did not include settlements on temporary differences in the total amount of PLN 669 642 thousand incurred due to investments in subsidiaries and affiliated companies in deferred tax calculation and PLN 531 005 thousand at the end of 2013.

Deferred tax assets are recognised, because it is probable that future taxable profit will occur.