8.15
Tax

8.15.1 Income tax

The effective corporate income tax charge comprises the following:

The effective tax rate consists of the reported tax charge for the current year, divided by the profit before taxes. The effective tax rate in 2019 amounted to -16.1% (2018: 28.7%). The calculated weighted average tax rate of 25.0% mainly declines to the effective tax rate of -16.1% due to the recognition of the deferred tax assets of € 21.4 million for the application of the Dutch liquidation loss facility regarding US business (-41.9%) and the Finnish business (-3.0%). The main offsetting effect comes from the participation exemption, which increases the effective tax rate (+3.7%) as it includes the cumulative translation loss on the net US$ investment (see note 6.16.1). See note 6.15.2 for more details on the recognition of the deferred tax assets.

Accounting policy

Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

Current tax assets and liabilities are offset only if certain criteria are met.

8.15.2 Deferred taxes

Deferred taxes comprise the following:

The movement in the deferred tax assets was as follows:

The movement in the deferred tax liabilities was as follows:

Deferred tax assets and deferred tax liabilities are offset for the right-of-use assets and lease libilities. 

Unrecognized tax assets
For some subsidiaries Accell Group has insufficient assurance that future taxable profits will be available to realize the related tax benefits of carry forward losses of € 45.5 million (2018: € 126.3 million). As a result no deferred tax assets are recognized for these carry forward losses. These unused carry forward losses are mainly carry forward losses in the United Kingdom and partially relate to the global results of the Raleigh group before the acquisition by Accell Group in 2012. The carry forward period of these unused tax benefits is 30 years for € 1.1 million and indefinite for € 44.4 million. As Accell Group will apply the Dutch liquidation loss facility, the carry forward losses of US of € 83.9 million are no longer disclosed. 

Recognised liquidation loss
In 2019, Accell Group reached agreement with a private equity firm on the sale of its loss making US business of Accell North America Inc. Accell Group incurred a liquidation loss of € 168.3 million. Accell Group currently expects qualification for the requirements of the Dutch liquidation loss facility to be probable.

Management has determined that the full recoverability of cumulative tax losses is uncertain. However, management considers it probable that future taxable profits will be available against which such losses can be used. Based on the five-year business plan, profitability gained in the past and current estimates of future taxable profits, management recognizes a taxable effect of € 95.5 million (tax impact: € 21.4 million).

Unrecognised liquidation loss
For the remaining liquidation loss regarding the sale of US business of Accell North America, Inc. of € 72.8 million. At this point in time, management considers that it is not probable that these losses can be offset against future taxable profits. However, management is exploring possibilities of realistic tax planning opportunities that are consistent with Accell Group’s business strategy. The expiry date of the tax losses for which no deferred tax asset has been recognized is 31 December 2026.

Accounting estimates and judgements

The tax legislation in the countries in which Accell Group operates is often complex and subject to interpretation. Judgement is required to determine the current and deferred income tax position. New information may become available that causes Accell Group to change its judgement regarding the adequacy of existing tax liabilities and the recoverability of deferred tax assets; such changes will impact the income tax expense in the period that such a determination is made.
Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies.

Accounting policy

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for: 

- temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;
- temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that Accell Group is not able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future;
- taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized; such reductions are reversed when the probability of future taxable profits improves. Unrecognized deferred tax assets are reassessed at each reporting date and recognized to the extent that it has become probable that future taxable profits will be available against which they can be used.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which Accell Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset only if certain criteria are met.