Syngenta AG (SYT)

(i) Valuation allowance against deferred tax assets

IAS 12, “Income Taxes” requires a deferred tax asset to be recognized for unused tax losses and other deductible temporary differences to the extent that it is probable that future taxable profit will be available to allow their utilization. At December 31, 2004 a deferred tax asset was recognized in full for unused tax losses and other temporary differences of US$35 million in France. The majority of the tax losses were incurred in association with three recent restructuring initiatives which have been or are being implemented.

SFAS No. 109, “Accounting for Income Taxes” requires deferred tax assets to be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. All available evidence, both positive and negative, is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed. However, where cumulative recent losses have been incurred, based on the criteria in SFAS No. 109, future projections of income alone, which are by their nature subject to estimation uncertainty, are not generally sufficient to support a position that a valuation allowance is not needed. In assessing the potential need for a valuation allowance for the French deferred tax assets, therefore, Syngenta has not taken account of the future forecast benefits of the restructuring in France. Accordingly, a valuation allowance of US$34 million was recognized for these deferred tax assets at December 31, 2004 for US GAAP.

In 2005, the tax position of this Syngenta entity changed, and it recorded a taxable profit. Consequently, the US GAAP valuation allowance has been reduced to US$4 million, increasing US GAAP net income for 2005 by US$26 million and the currency translation shareholders’ equity component by US$4 million.

(i) Valuation allowance against deferred tax assets

IAS 12, “Income Taxes” requires a deferred tax asset to be recognized for unused tax losses and other deductible temporary differences to the extent that it is probable that future taxable profit will be available to allow their utilization. A deferred tax asset has been recognized in full for unused tax losses and other temporary differences of US$35 million in France. The majority of the tax losses have been incurred in association with three recent restructuring initiatives which have been or are being implemented. In the opinion of management, the restructuring activity is unlikely to recur, and will result in significant future financial benefits which will enable the tax losses to be fully utilized.

SFAS No. 109, “Accounting for Income Taxes” requires deferred tax assets to be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. All available evidence, both positive and negative, is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed. However, where cumulative recent losses have been incurred, based on the criteria in SFAS No. 109, future projections of income alone, which are by their nature subject to estimation uncertainty, are not generally sufficient to support a position that a valuation allowance is not needed. In assessing the potential need for a valuation allowance for the French deferred tax assets, therefore, Syngenta has not taken account of the future forecast benefits of the restructuring in France. Accordingly, a valuation allowance of US$34 million has been recognized for these deferred tax assets.