DEFERRED TAXES

Deferred income tax charges and credits generally arise when there are timing differences in a company's recognition of revenues and/or expenses for income tax reporting and for general reporting purposes, due to the fact that the Internal Revenue Code does not conform to generally accepted accounting principles. For example, certain fixed assets may be depreciated using the straight line principles according to GAAP and using accelerated methods for tax purposes. When these treatments result in higher pretax profits for general reporting purposes than for income tax purposes, a deferred liability is created on the balance sheet. This item will be included in Net Worth for the purposes of ratio analysis, as part of the statement normalization process.