SOFTWARE AG | ANNUAL REPORT 2012 178 Deferred taxes Deferred tax assets and liabilities are recognized for temporary differences between the carrying amounts in the tax accounts (tax base) and the carrying amounts in the Consolidated Balance Sheet. Deferred tax assets also include claims for tax reductions resulting from the anticipated use of tax loss carryforwards in subsequent years, the realization of which is deemed highly probable. Deferred taxes are calculated on the basis of tax rates anticipated to apply in the relevant countries in accordance with the legal situation prevailing at the time of realization (reversal of tax deferrals). Deferred tax assets and liabilities are not discounted. The carrying amounts of the recognized assets and liabilities are regularly examined and adjusted if necessary. Liabilities Liabilities are recorded at amortized cost, except for financial liabilities at fair value through profit or loss. Amortized cost is determined using the effective interest rate. Financial liabilities at fair value through profit or loss only include negative fair values from derivatives, insofar as these were not recognized in hedge accounting. Provisions Provisions are reported when the Company has a current legal or constructive obligation towards a third party due to a past event that is likely to result in a future outflow of resources and for which the amount of the obligation can be reliably estimated. Estimates are regularly reviewed and adjusted. If the effect of discounting is significant, the provision is recognized in the amount of the present value of the expected future cash flows. Provisions for pensions and similar obligations Defined benefit plans and defined contribution plans exist with respect to company pensions. The pension provisions are calculated using actuarial principles in accordance with the projected unit credit method set out in IAS 19. This approach takes into account anticipated future increases in pensions and salaries in addi- tion to the pensions known as of the balance sheet date. Employees do not receive illness-related allowances either in Germany or abroad.