Income Tax Accounting Policy
Taxes on income are provided in the same periods as the revenues and expenses to which they relate. Deferred taxes are determined using the comprehensive liability method and are calculated on the temporary differences that arise between the tax base of an asset or liability and its carrying value in the subsidiary's balance sheet prepared for consolidation purposes, except for those temporary differences related to investments in subsidiaries and associated companies, where the timing of their reversal can be controlled and it is probable that the difference will not reverse in the foreseeable future. Furthermore, withholding or other taxes on eventual distribution of subsidiaries' retained earnings are only taken into account where a dividend has been planned since generally the retained earnings are reinvested. Deferred tax assets or liabilities, measured at the tax rates that are expected to apply in the period of tax settlement or realization by the applicable entity, are included in the consolidated balance sheet as either a non-current asset or liability, with changes in the year recorded in the consolidated income statement in "Taxes" or in the consolidated statement of comprehensive income, if they relate to an item directly recorded in this statement. Deferred tax assets related to tax losses of relevant Group entities are recognized to the extent it is considered probable that future taxable profits will be available against which such losses can be utilized in the foreseeable future.
The estimated amounts for current and deferred tax assets or liabilities, including any amounts related to any uncertain tax positions, are based on currently known facts and circumstances. Tax returns are based on an interpretation of tax laws and regulations and record estimates based on these judgments and interpretations. The tax returns are subject to examination by the competent taxing authorities, which may result in an assessment being made requiring payments of additional tax, interest or penalties. Inherent uncertainties exist in the estimates of the tax positions.
Source: Novartis AG, Annual Report
Income Tax Expense (Benefit)
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Novartis AG, income tax expense (benefit), continuing operations
Source: Based on data from Novartis AG Annual Reports
| Item |
Description |
The company |
| Current income tax expense |
The component of income tax expense for the period representing amounts of income taxes paid or payable (or refundable) for the period for all income tax obligations as determined by applying the provisions of relevant enacted tax laws to relevant amounts of taxable income (loss) from continuing operations. |
Novartis AG's current income tax expense increased from 2009 to 2010 and from 2010 to 2011.
|
| Deferred tax income |
The component of income tax expense for the period representing the net change in the entity's deferred tax assets and liabilities pertaining to continuing operations. |
Novartis AG's deferred tax income increased from 2009 to 2010 but then declined significantly from 2010 to 2011.
|
| Income tax expense |
The sum of the current income tax expense (benefit) and the deferred income tax expense (benefit) pertaining to pretax income (loss) from continuing operations; income tax expense (benefit) may include interest and penalties on tax uncertainties based on the entity's accounting policy. |
Novartis AG's income tax expense increased from 2009 to 2010 but then slightly declined from 2010 to 2011 not reaching 2009 level.
|
Effective Income Tax Rate (EITR)
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Novartis AG, effective income tax rate (EITR) reconciliation
Source: Based on data from Novartis AG Annual Reports
| Item |
Description |
The company |
| Effective tax rate |
A ratio calculated by dividing the reported amount of income tax expense attributable to continuing operations for the period by GAAP-basis pretax income from continuing operations. |
|
Deferred Tax Assets (Liabilities), Net
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Novartis AG, deferred tax assets (liabilities), net
Source: Based on data from Novartis AG Annual Reports
| Item |
Description |
The company |
| Gross deferred tax assets |
The sum of the tax effects as of the balance sheet date of the amounts of all future tax deductions arising from temporary differences between tax basis and generally accepted accounting principles basis recognition of assets, liabilities, revenues and expenses, which can only be deducted for tax purposes when permitted under enacted tax laws (before the valuation allowance, if any, to reduce such sum amount to net realizable value). Includes any tax benefit realized in deferred tax assets for significant impacts of tax planning strategies. |
Novartis AG's gross deferred tax assets increased from 2009 to 2010 and from 2010 to 2011.
|
| Net deferred tax assets |
The aggregate tax effects as of the balance sheet date of all future tax deductions arising from temporary differences between tax basis and generally accepted accounting principles basis recognition of assets, liabilities, revenues and expenses, which can only be deducted for tax purposes when permitted under enacted tax laws; net of deducting the allocated valuation allowance, if any, to reduce such amount to net realizable value. |
Novartis AG's net deferred tax assets increased from 2009 to 2010 and from 2010 to 2011.
|
| Net deferred tax balance |
For entities that net deferred tax assets and tax liabilities, represents the unclassified net amount of deferred tax assets and liabilities as of the balance sheet date, which result from applying the applicable enacted tax rate to net temporary differences and carryforwards pertaining to assets or liabilities. A temporary difference is a difference between the tax basis of an asset or liability and its carrying amount in the financial statements prepared in accordance with generally accepted accounting principles that will reverse in ensuing periods. |
Novartis AG's net deferred tax balance declined from 2009 to 2010 but then increased from 2010 to 2011 not reaching 2009 level.
|
