Deferred taxes

The adjustments to deferred taxes comprise the following items:

The deferred taxes in the income statement for the year 2014 have been adjusted with EUR 16.8 million, of which EUR 5.2 million resulted from fair value measurement of the investment property.

Deferred taxes are accounted in accordance with IAS 12 Income Taxes. Deferred tax assets and deferred tax liabilities are generally recognized in respect of all temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes, using the liability method.

The changes in deferred taxes arise in practice from the fair value measurement of investment property and financial instruments, which has resulted in more items of deferred taxes. The largest single item under deferred taxes, EUR 332 million, arises from the temporary difference between the fair value and taxable value (non-depreciated residual value applied in taxation) of VVO Group’s investment property. Subsequent to initial recognition, an investment property is measured at fair value through profit or loss at the end of the reporting period. Following from that, deferred tax is recorded based on the whole temporary difference through profit or loss. The tax is based on the assumption that VVO Group will primarily dispose of an investment property by selling the property and not the shares in the company in question. Prior to the transition the Group has recognized deferred taxes following mainly the IFRS principles and consequently the changes have arisen mostly due to clarifications to the recognition principles previously applied, excluding the new items described above. Deferred taxes have been determined using the tax rates (and laws) effective at 31 December 2014.