28 Income taxes

Page 1 of 2

adidas AG and its German subsidiaries are subject to German corporate and trade taxes. For the year ending December 31, 2008, the statutory corporate income tax rate of 15% plus a surcharge of 5.5% thereon is applied to earnings. The municipal trade tax is approximately 11.6% of taxable income.

For non-German companies, deferred taxes are calculated based on tax rates that have been enacted or substantively enacted by the closing date.

Deferred tax assets and liabilities

Deferred tax assets and liabilities are offset if they relate to the same fiscal authority. The following deferred tax assets and liabilities, determined after appropriate offsetting, are presented on the balance sheet:

Deferred tax assets/liabilities

€ in millions

Deferred tax assets

344

315

Deferred tax liabilities

(463)

(450)

Deferred tax assets, net

(119)

(135)

The movements of deferred taxes are as follows:

Movement of deferred taxes
€ in millions
	2008	2007

Deferred tax assets, net as at January 1	(135)	(190)
Deferred tax income	71	26
Change in consolidated companies see Note 4¹⁾	(9)	—
Change in deferred taxes on assets classified as held-for-sale see Note 3²⁾	3	—
Change in deferred taxes attributable to effective portion of qualifying hedging instruments recorded in equity see Note 2	(41)	11
Currency translation differences	(5)	25
Change in deferred taxes attributable to actuarial gains and losses recorded in equity see Note 18	(3)	(7)
Deferred tax assets, net as at December 31	(119)	(135)

Relates to the acquisition of Ashworth, Inc. and Textronics, Inc. for the year ending December 31, 2008.

Relates to the disposal group Gekko Brands, LLC which is classified as held-for-sale for the year ending December 31, 2008.

Gross Group deferred tax assets and liabilities before valuation allowances and appropriate off-settings are attributable to the items detailed in the table below:

Deferred taxes
€ in millions
	Dec. 31, 2008	Dec. 31, 2007

Non-current assets	88	75
Current assets	100	112
Accrued liabilities and provisions	140	143
Accumulated tax loss carry-forwards	91	8
Deferred tax assets	419	338
Non-current assets	444	420
Current assets	45	47
Accrued liabilities and provisions	49	6
Deferred tax liabilities	538	473
Deferred tax assets, net	(119)	(135)

The acquisitions of Ashworth, Inc. and Textronics, Inc. were accounted for under the “purchase method”see Note 4. Deferred tax liabilities were recorded representing the difference between the fair value and the tax basis of acquired assets.

1 | 2

Back