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This excerpt taken from the ELN 6-K filed Aug 28, 2009. b
Taxation
There are different rules under IFRS and U.S. GAAP in
relation to the recognition of DTAs associated with share-based
compensation. DTAs are only recognised under either GAAP in
relation to jurisdictions where tax deductions are available to
the employer for equity grants given to employees (relevant
employee equity awards). For example, such tax deductions are
available in the United States but in general not in Ireland.
Under U.S. GAAP, a DTA may be recognised for relevant
employee equity awards only to the extent that a compensation
expense has previously been recorded in relation to those
awards. In contrast, under IFRS, a DTA may be recognised in
relation to the tax effect of the full intrinsic value at the
balance sheet date of all relevant employee equity awards
expected to be exercised, regardless of whether or not a
compensation expense has previously been recognised for those
awards. Accordingly, the total DTA recognised under IFRS is
substantially higher than under U.S. GAAP. Additionally,
under IFRS the amount of the DTA recorded through the income
statement is limited to the tax value of the compensation
expense previously recognised for those awards (similar to
U.S. GAAP), with the balance between that amount and the
tax effect of the total intrinsic value recorded as a credit
directly to shareholders’ equity (IFRS only; as described
above there is no equivalent DTA under U.S. GAAP). However,
the amount of DTA recognised in the income statement is higher
under IFRS than under U.S. GAAP because the expensing of
share-based compensation commenced earlier under IFRS (November
2002) than under U.S. GAAP (January 2006), and
consequently the tax value of the cumulative compensation
expense is significantly higher under IFRS compared to
U.S. GAAP.
Under U.S. GAAP, all DTAs are recognised on the presumption
that no stock option derived net operating losses (both past and
present) were/are available, whereas under IFRS all DTAs are
recognised on the basis that stock option derived net operating
losses (both past and present) were/are available. This creates
some additional differences in the level of DTAs recognised
under IFRS and U.S. GAAP.
This excerpt taken from the ELN 6-K filed Mar 30, 2009. Taxation
We had a net income tax benefit of $270.1 million for 2008,
compared to a net income tax expense of $5.3 million for
2007. The income tax expense and benefit reflect tax at standard
rates in the jurisdictions in which we operate, the availability
of tax losses, foreign withholding tax and exempt income derived
from Irish patents. Our Irish patent derived income was exempt
from taxation pursuant to Irish legislation, which exempts
income derived from qualifying patents. Currently, there is no
termination date in effect for such exemption although since
1 January 2008, the amount of income that can qualify for
the patent exemption was capped at €5 million per
year. A net DTA existed at 31 December 2008; however, we
have recognised only part of this deferred tax asset on the
balance sheet. The rest of our deferred tax assets have not been
recognised as it is not probable at this time that these assets
will be realised in the future. At 31 December 2008, we
have gross unused tax loss carryforwards of
$3,387.0 million, and unrecognised deferred tax assets of
$488.8 million.
The net income tax benefit of $270.1 million in 2008
includes the recognition of a net DTA of $280.0 million.
The deferred tax assets or liabilities are determined based on
the differences between the GAAP basis financial statements and
tax basis of assets and liabilities using the tax rates
projected to be in effect for the periods in which the
differences are to be utilised. A DTA is recognised only to the
extent that it is probable that future taxable profits will be
available against which the asset can be utilised. DTAs are
reduced to the extent that it is no longer probable that the
related income tax benefit will be realised. Because of
cumulative losses, we only recognised a very small amount of
DTAs at 31 December 2007. However, as a result of the
U.S. business generating cumulative earnings in recent
years and projected U.S. profitability arising from the
continued growth of the Biopharmaceuticals business in the
United States, we now believe there is evidence to support the
generation of sufficient future taxable income to conclude that
it is probable that most of the U.S. DTAs will be realised
in future years. Accordingly, a deferred benefit of
$280.0 million was credited to the income statement and a
further $105.9 million deferred benefit was credited to
shareholders’ equity during 2008.
This excerpt taken from the ELN 20-F filed Feb 26, 2009. (q) Taxation
We account for income tax expense based on income before taxes
and it is computed using the asset and liability method.
Deferred tax assets (DTAs) and liabilities are determined based
on the difference between the financial statement and tax basis
of assets and liabilities using the enacted tax rates projected
to be in effect for the year in which the differences are
expected to reverse. DTAs are recognized for all deductible
temporary differences and operating loss and tax credit
carryforwards. A valuation allowance is required for DTAs if,
based on available evidence, it is more likely than not that all
or some of the asset will not be realized due to the inability
to generate sufficient future taxable income.
Significant estimates are required in determining our provision
for income taxes. Some of these estimates are based on
management’s interpretations of jurisdiction-specific tax
laws or regulations and the likelihood of settlement related to
tax audit issues. Various internal and external factors may have
favorable or unfavorable effects
Table of Contents
Elan
Corporation, plc
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
on our future effective income tax rate. These factors include,
but are not limited to, changes in tax laws, regulations
and/or
rates, changing interpretations of existing tax laws or
regulations, changes in estimates of prior years’ items,
past and future levels of R&D spending, likelihood of
settlement, and changes in overall levels of income before taxes.
Effective January 1, 2007, we adopted the provisions of
FASB Financial Interpretation No. 48, “Accounting
for Uncertainty in Income Taxes, an interpretation of FASB
No. 109,” (FIN 48), under which we recognize
the effect of income tax positions only if those positions are
more likely than not of being sustained. Recognized income tax
positions are measured at the largest amount that is greater
than 50% likely of being realized. Changes in recognition or
measurement are reflected in the period in which the change in
judgment occurs. Prior to the adoption of FIN 48, we
recognized the income tax positions only if such positions were
probable of being sustained. We account for interest and
penalties related to unrecognized tax benefits in income tax
expense.
This excerpt taken from the ELN 6-K filed Mar 31, 2008. Taxation
We had a net tax expense of $5.3 million for 2007, compared
to a net tax benefit of $11.2 million for 2006. The tax
expense and benefit reflect tax at standard rates in the
jurisdictions in which we operate, the availability of tax
losses, foreign withholding tax and exempt income derived from
Irish patents. Our Irish patent derived income was exempt from
taxation pursuant to Irish legislation, which exempts income
derived from qualifying patents. Currently, there is no
termination date in effect for such exemption although with
effect from 1 January 2008, the amount of income that can
qualify for the patent exemption will be capped at
€5 million per year. A net deferred tax asset existed
at 31 December 2007; however, we have recognised only part
of this deferred tax asset on the balance sheet. The rest of our
deferred tax assets have not been recognised as it is not
probable at this time that these assets will be realised in the
future. At 31 December 2007, we have gross unused tax loss
carryforwards of $3,083.8 million, and unrecognised
deferred tax assets of $890.0 million.
This excerpt taken from the ELN 20-F filed Feb 28, 2008. (p) Taxation
We account for income tax expense based on income before taxes,
and it is computed using the asset and liability method.
Deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax basis of
assets and liabilities using tax rates projected to be in effect
for the year in which the differences are expected to reverse.
Significant estimates are required in determining our provision
for income taxes. Some of these estimates are based on
management’s interpretations of jurisdiction-specific tax
laws or regulations and the likelihood of settlement related to
tax audit issues. Various internal and external factors may have
favorable or unfavorable effects on our future effective income
tax rate. These factors include, but are not limited to, changes
in tax laws, regulations
and/or
rates, changing interpretations of existing tax laws or
regulations, changes in estimates of prior years’ items,
past and future levels of R&D spending, likelihood of
settlement and changes in overall levels of income before taxes.
Valuation allowances are recorded to reduce deferred tax assets
when it is more likely than not that a tax benefit will not be
realized. We do not record a provision for income tax on
undistributed earnings of foreign subsidiaries that we do not
expect to repatriate in the foreseeable future.
Effective January 1, 2007, we adopted the provisions of
FASB Financial Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes, an interpretation of FASB
No. 109,” (FIN 48), under which we recognize the
effect of income tax positions only if those positions are more
likely than not of being sustained. Recognized income tax
positions are measured at the largest amount that is greater
than 50% likely of being realized. Changes in recognition or
measurement are reflected in the period in which the change in
judgment occurs. The impact of adopting FIN 48 is disclosed
in Note 21.
Table of Contents
Elan
Corporation, plc
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(q) Discontinued
operations, sales of businesses, and assets and liabilities held
for sale
In accordance with SFAS 144, the results and gains or
losses arising from discontinued operations are aggregated and
included within one line in the income statement, “Net
income/(loss) from discontinued operations.” A discontinued
operation is a component of an entity whose operations and cash
flows can be clearly distinguished and have been or will be
eliminated from the ongoing operations of the entity within
12 months from the disposal date and with respect to which
the entity will not receive significant cash flows from
continuation of activities, and the entity will not have
significant continuing involvement in the operations of the
component after its disposal, such as ongoing supply
arrangements or formulation activities.
Sales of businesses that do not constitute discontinued
operations as defined above, are recorded separately on the face
of the income statement. The reported gain is equal to proceeds
received net of the carrying values of the business assets and
liabilities being disposed of, transaction costs and the
allocation of goodwill based on the relative fair value of the
business to its reporting unit.
We categorize assets and liabilities as held for sale when all
of the following conditions are met:
This excerpt taken from the ELN 6-K filed Mar 30, 2007. Taxation
We had a net tax benefit of $11.2 million for 2006,
compared to a net tax charge of $0.4 million for 2005. The
tax charge and benefit reflect tax at standard rates in the
jurisdictions in which we operate, the availability of tax
losses, foreign withholding tax and exempt income derived from
Irish patents. Our Irish patent derived income was exempt from
taxation pursuant to Irish legislation, which exempts income
derived from qualifying patents. Currently, there is no
termination date in effect for such exemption. A net deferred
tax asset existed at 31 December 2006; however, we have
recognised only part of this deferred tax asset on the balance
sheet. The rest of our deferred tax assets have not been
recognised as it is not probable at this time that these assets
will be realised in the future. At 31 December 2006, we
have gross unused tax loss carryforwards of
$2,834.9 million, and unrecognised deferred tax assets of
$884.7 million.
Net
Income from Discontinued Operations
Net income from discontinued operations was $Nil in 2006,
compared to $104.1 million in 2005. The 2005 net
income from discontinued operations includes a net gain on sale
of businesses of $103.6 million. The most significant gains
on disposal relate to Zonegran of $85.6 million and the
European business of $17.1 million as described below.
In April 2004, we completed the sale of our interests in
Zonegran in North America and Europe to Eisai for a net total
consideration of $113.5 million at closing. We were also
entitled to receive additional consideration of up to
$110.0 million from Eisai if no generic Zonegran was
approved by certain dates up through 1 January 2006. This
consideration was not accrued at 31 December 2004 as it was
not reasonable to assume that it would be received. We had
received $85.0 million of this contingent consideration
prior to the approval of generic Zonegran in December 2005.
Consequently, the total net proceeds received from the
divestment of Zonegran amounted to $198.5 million and
resulted in a cumulative net gain of $133.6 million, of
which $85.6 million was recognised in 2005 and
$48.0 million in 2004.
In February 2004, we completed the sale of our European sales
and marketing business to Zeneus Pharma Ltd. for initial net
cash proceeds of $93.2 million, resulting in a loss of
$6.5 million in the year ended 31 December 2004. We
received an additional $6.0 million in February 2005, which
was accrued at 31 December 2004, and $15.0 million in
December 2005 of contingent consideration, which resulted in a
net gain of $17.1 million in 2005 after the release of a
contingent liability of $2.1 million, which was not
ultimately required. We will not receive any further
consideration in respect of this disposal.
42 Elan
Corporation, plc 2006 Annual Report
Table of Contents
Financial Review
This excerpt taken from the ELN 6-K filed Mar 31, 2006. Taxation
We had a net tax charge of $0.4 million for 2005, compared
to a net tax benefit of $4.3 million for 2004. The tax
charge and benefit reflect tax at standard rates in the
jurisdictions in which we operate, exempt income derived from
Irish patents, foreign withholding tax and the availability of
tax losses. Our Irish patent derived income was exempt from
taxation pursuant to Irish legislation, which exempts from Irish
taxation income derived from qualifying patents. Currently,
there is no termination date in effect for such exemption. A net
deferred tax asset existed at 31 December 2005; however,
the deferred tax asset is not recognised on the balance sheet as
it is not probable that the asset will be realised in the future.
Net Income from Discontinued
Operations
Net income from discontinued operations was $104.1 million
in 2005, compared to $97.7 million in 2004. The net income
from discontinued operations includes a net gain on sale of
businesses of $103.6 million (2004: $68.0 million).
The most significant gains on disposal relate to
Zonegrantm
(zonisamide) of $85.6 million (2004:
$48.0 million) and the European business of
$17.1 million (2004: $6.5 million loss).
In April 2004, we completed the sale of our interests in
Zonegran in North America and Europe to Eisai for a net total
consideration of $113.5 million at closing. We were also
entitled to receive additional consideration of up to
$110.0 million from Eisai through 1 January 2006,
primarily contingent on the date of generic Zonegran approval.
This consideration was not accrued at 31 December 2004 as
it was not reasonable to assume that it would be received. We
had received $85.0 million of this contingent consideration
prior to the approval of generic Zonegran in December 2005.
Consequently, the total net proceeds received from the
divestment of Zonegran amounted to $198.5 million and
resulted in a cumulative net gain of $133.6 million, of
which $85.6 million was recognised in 2005 and
$48.0 million in 2004.
In February 2004, we completed the sale of our European sales
and marketing business to Zeneus Pharma Ltd. for initial net
cash proceeds of $93.2 million, resulting in a loss of
$6.5 million in the year ended 31 December 2004. We
received an additional $6.0 million in February 2005, which
was accrued at 31 December 2004, and $15.0 million in
December 2005 of contingent consideration, which resulted in a
net gain of $17.1 million in 2005 after the release of
contingent liabilities of $2.1 million, which were not
required ultimately. We will not receive any further
consideration in respect of this disposal.
During the course of the recovery plan, which was announced in
July 2002 and completed in February 2004, we sold a number of
products and businesses, including
Frovatm
(frovatriptan succinate), Zonegran, Myobloc/
Neurobloctm
(botulinum toxin type B),
Zanaflextm
(tizanidine hydrochloride),
Naprelantm
(naproxen sodium controlled-release), our European sales
and marketing business, our diagnostics business, the
dermatology portfolio of products, the
Abelcettm
(amphotericin B lipid complex) business, the primary
care franchise, the Pain Portfolio of products and also sold or
closed a number of drug delivery businesses including the sale
of a transdermal technology business, the closure of our medipad
business and our research facility in Princeton and the sale of
a U.K. drug delivery business. We have recorded the results
and gains or losses on the disposal of these operations within
discontinued operations in the consolidated income statement.
This excerpt taken from the ELN 20-F filed Mar 30, 2006. (p) Taxation
The provision for income taxes has been determined using the
asset and liability approach of accounting for income taxes.
Under this approach, deferred taxes represent the future tax
consequences of events that have been recognized for financial
reporting or income tax reporting purposes. Provision for income
tax represents income taxes paid or payable for the current year
plus the change in deferred taxes during the year. Deferred
taxes result from differences between the financial and tax
basis of our assets and liabilities, and are adjusted for
changes in tax rates and tax laws when changes are enacted.
Valuation allowances are recorded to reduce deferred tax assets
when it is more likely than not that a tax benefit will not be
realized. We do not record a provision for income tax on
undistributed earnings of foreign subsidiaries that we do not
expect to repatriate in the foreseeable future.
We establish liabilities for possible assessments by taxing
authorities resulting from known tax exposures. Such amounts
represent a reasonable provision for taxes ultimately expected
to be paid, and may need to be adjusted over time as more
information becomes known.
(q) Discontinued
operations, sales of businesses, and assets and liabilities held
for sale
In accordance with SFAS 144, the results and gains or
losses arising from discontinued operations are aggregated and
included within one line in the income statement, “Net
income/(loss) from discontinued operations.” A discontinued
operation is a component of an entity whose operations and cash
flows can be clearly distinguished and have been or will be
eliminated from the ongoing operations of the entity within
twelve months from the disposal date and with respect to which
the entity will not receive significant cash flows from
continuation of activities, and the entity will not have
significant continuing involvement in the operations of the
component after its disposal, such as ongoing supply
arrangements or formulation activities.
Sales of businesses that do not constitute discontinued
operations as defined above, are recorded separately on the face
of the income statement. The reported gain is equal to proceeds
received net of the carrying values of the
Table of Contents
Elan
Corporation, plc
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
business assets and liabilities being disposed of, transaction
costs and the allocation of goodwill based on the relative fair
value of the business to its reporting unit.
We categorize assets and liabilities as held for sale when all
of the following conditions are met:
This excerpt taken from the ELN 6-K filed Apr 11, 2005. j Taxation Current tax, including Irish corporation tax and foreign taxes, is provided on our taxable profits, at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred taxation is recognised in full in respect of timing differences that have originated but not reversed at the balance sheet date. | EXCERPTS ON THIS PAGE:
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