for any diminution of deferred tax assets. There is not the same concern or protection in respect of deferred tax liabilities.
We consider that these inconsistencies can be avoided if deferred tax is treated differently in the tax covenant. We therefore have prepared an alternative structure of tax covenant which we believe takes a more logical approach to deferred taxes. It is our view that this alternative structure of measuring loss by reference to the reduction in the net assets of the Company, rather than by reference to its tax cash flows, is far more appropriate in the vast majority of corporate transactions. The situations where this may not be appropriate include those transactions involving long-life assets, high levels of tangible or intangible fixed assets, or large tax losses adjusted within the deferred tax account.
Jason Fayers Andrew Strickland
February 2010
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