Deferred tax assets arise from a variety of sources, the most
significant being: a) tax losses that can be carried forward to
be utilized against profits in future years; b) expenses recognized
in the books but disallowed in the tax return until the
associated cash flow occurs; and c) valuation changes of
assets
which need to be tax effected for book purposes but
are taxable only when the valuation change is realized.
We record a valuation allowance to reduce our deferred
tax assets to the amount which can be recognized in line
with the relevant accounting standards. The level of deferred tax asset recognition is influenced by management’s assessment
of UBS’s historic and future profitability profile. At each
balance sheet date, existing assessments are reviewed and,
if necessary, revised to reflect changed circumstances. In a
situation where recent losses have been incurred, the relevant
accounting standards require convincing evidence that
there will be sufficient future tax capacity. In 2007, we have
not recognized a significant amount of the potential deferred
tax assets relating to the losses that we incurred and
which are available to offset against future taxable income,
due to the recognition criteria set by the accounting standards.
See Note 22 to the Financial Statements for further
details.
