Income Tax Accounting Policy
This heading in the accompanying consolidated income statement includes all the expenses and credits arising from the corporate income tax levied on the Spanish Group companies and similar taxes applicable to Telefónica Group's foreign operations.
The income tax expense of each year includes both current and deferred taxes, where applicable.
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.
Deferred taxes are calculated based on a statement of financial position analysis of the temporary differences generated as a result of the difference between the tax bases of assets and liabilities and their respective carrying amounts.
The main temporary differences arise due to discrepancies between the tax bases and carrying amounts of property, plant and equipment, intangible assets, and non-deductible provisions, as well as differences in the fair value and tax bases of net assets acquired from a subsidiary, associate or joint venture.
Furthermore, deferred taxes arise from unused tax credits and tax loss carryforwards.
Telefónica Group determines deferred tax assets and liabilities by applying the tax rates that will be effective when the corresponding asset is received or the liability is settled, based on tax rates and tax laws that are enacted (or substantively enacted) at the reporting date.
Deferred income tax assets and liabilities are not discounted to present value and are classified as non-current, irrespective of the date of their reversal.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax liabilities on investments in subsidiaries, branches, associates and joint ventures are not recognized if the parent company is in a position to control the timing of the reversal and if the reversal is unlikely to take place in the foreseeable future.
Deferred income tax relating to items directly recognized in equity is recognized in equity. Deferred tax assets and liabilities arising from the initial recognition of the purchase price allocation of business combinations impact the amount of goodwill. However, subsequent changes in tax assets acquired in a business combination are recognized as an adjustment to profit or loss.
Deferred tax assets and liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Source: Telefonica S.A., Annual Report
Income Tax Expense (Benefit)
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Telefonica S.A., income tax expense (benefit), continuing operations
USD $ in millions, translated from EUR €
Source: Based on data from Telefonica S.A. Annual Reports
| Item |
Description |
The company |
| Current 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. |
Telefonica S.A.'s current tax expense declined from 2009 to 2010 and from 2010 to 2011.
|
| Deferred tax expense (benefit) |
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. |
Telefonica S.A.'s deferred tax expense (benefit) increased from 2009 to 2010 but then slightly declined from 2010 to 2011 not reaching 2009 level.
|
| 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. |
Telefonica S.A.'s income tax expense increased from 2009 to 2010 but then declined significantly from 2010 to 2011.
|
Deferred Tax Assets (Liabilities), Net
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Telefonica S.A., deferred tax assets (liabilities), net
USD $ in millions, translated from EUR €
Source: Based on data from Telefonica S.A. Annual Reports
| Item |
Description |
The company |
| 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. |
Telefonica S.A.'s deferred tax assets declined from 2009 to 2010 but then increased from 2010 to 2011 not reaching 2009 level.
|
| Deferred tax assets (liabilities), net |
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. |
Telefonica S.A.'s deferred tax assets (liabilities), net declined from 2009 to 2010 but then increased from 2010 to 2011 not reaching 2009 level.
|
