Universal Registration Document 2022

Accounting principles and methods

Income taxes include the current tax expense (income) and the deferred tax expense (income), calculated under the tax legislation in force in the countries where earnings are taxable.

In compliance with IAS 12, current and deferred taxes are generally recorded in the income statement or in equity symmetrically to the underlying operation.

Under IAS 32, income taxes on distributions to holders of equity instruments (notably dividends and the remuneration paid to holders of perpetual subordinated bonds) must be recognised in accordance with IAS 12. The Group considers that these distributions are paid out of previous years’ accumulated profits and as a result the associated tax effects are included in the net income for the period.

In application of IFRIC 23, a tax asset or liability is recognised when there is uncertainty over income tax treatments. If the Group considers it likely that the tax authorities will not accept its chosen treatment, it recognises a tax liability, and if it considers it likely that the tax authorities will reimburse a tax that has already been paid, it recognises a tax asset. The tax assets and liabilities relating to these uncertainties are estimated on a case-by-case basis and stated at the most likely amount, or the weighted average of the various outcomes considered. These tax assets and liabilities are included in deferred taxes.

The current tax expense (income) is the estimated amount of tax due on the taxable income for the period, calculated using the tax rates adopted at the year-end.

Deferred taxes result from temporary differences between the book value of assets and liabilities and their tax basis. No deferred taxes are recognised for temporary differences generated by:

• goodwill which is not tax deductible;
• the initial recognition of an asset or liability in a transaction which is not a business combination and does not affect the accounting profit or taxable profit (tax loss) at the transaction date;
• investments in subsidiaries and associates, investments in branches and interests in joint arrangements, when the Group controls the timing of reversal of the temporary differences, and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are valued at the expected tax rate for the period in which the asset will be realised or the liability extinguished, based on tax rates adopted at the year-end. If the tax rate changes, deferred taxes are adjusted to the new rate and the adjustment is recorded in the income statement, unless it relates to an underlying for which changes in value are recorded in equity, for example in accounting for actuarial gains and losses or fair value on hedging instruments and debt or equity securities.

Deferred taxes are reviewed at each closing date, to take into account changes in tax legislation and the prospects for recovery of deductible temporary differences. Deferred tax assets are only recognised when it is probable that the Group will have sufficient taxable profit to utilise the benefit of the asset in the foreseeable future, or beyond that horizon, if there are deferred tax liabilities with the same maturity.

Deferred tax assets and liabilities are reported on a net basis, determined at the level of a tax entity or tax group.

Pillar two rules

To address concerns about declining tax bases and the shifting of taxable profits between States by large multinational companies, a worldwide agreement to introduce a minimum corporate tax rate has been reached by more than 135 countries. In December 2021, the Organisation for Economic Co-operation and Development (OECD) published a proposed reform of international tax rules, notably including the introduction of a minimum 15% tax rate on profits of multinational groups (the “Pillar Two Rules”). At the date of publication of these financial statements, no country where the Group does business had transposed these rules into its national laws. The Group is closely monitoring legislative progress in each country where it does business, in order to be ready to implement the rules once they are enacted.

Based on the current agreement and the tax rates currently in force in the countries where the Group has operations, subject to the Group developing future businesses or the law changing in the relevant countries before the Pillar Two Rules come into force, the Group does not expect this corporate income tax reform to have any significant impacts.