7. Deferred Taxes 6. Other Short-term Financial Assets existing balance sheet items and future transactions. The value recorded corresponds to the market value valid on the balance sheet date.  This item includes the valuation of derivative financial  instruments that existed as of the balance sheet date and where recognized as assets. The financial instruments as of the balance sheet date include forward exchange transactions used to hedge Deferred taxes relate to the following items:  accounting, the tax expense is € 2 million higher. Excluding this effect, the tax ratio for financial year 2004 would be 29.6% which represents a 0.5%-pts. deviation from the current 30.1% tax rate as disclosed in the annual financial statement.  Deferred taxes from items recorded in equity with neutral effect on profits (hedge accounting) are included to the amount of  € 15.7 million (previous year: € 7.2 million). As of December 31, 2004 tax losses carried forward totaled  € 5.4 million (previous year: € 9.4 million). This leads to deferred tax assets of € 2.3 million (previous year: € 3.0 million).  Following value adjustment, the tax losses carried forward were included in deferred tax assets to the amount of € 0.4 million (previous year: € 0.6 million). The tax losses carried forward  primarily relate to inactive companies so that use of these tax losses seems unlikely.  Other than in the previous year, deferred tax liabilities for  withholding tax from possible dividends on all distributable  profits of subsidiaries are included. Due to this change in Deferred tax assets and liabilities are netted if they relate to the same tax authority. Accordingly, they are disclosed in the balance sheet as follows: Deferred tax assets 51.6 36.5 Deferred tax liabilities 9.6 3.2 Deferred tax assets, net 42.0 33.3 Dec. 31, 2004 Dec. 31, 2003 € million € million Accumulated tax losses carried forward 2.3 3.0 Long-term assets 4.0 3.4 Short-term assets 21.6 18.2 Provisions and other liabilities 16.5 12.8 From netting in equity with neutral effect on profits 15.7 7.2 Value adjustments -2.0 -2.3 Deferred tax assets 58.1 42.2 Long-term assets 13.3 7.0 Short-term assets 1.4 1.3 Provisions and other liabilities 1.4 0.6 Deferred tax liabilities 16.1 8.9 Deferred tax assets, net 42.0 33.3 Dec. 31, 2004 Dec. 31, 2003 € million € million Foreword | Mission | Management Report | Share | Marketing |  Consolidated Financial Statements - IFRS - | Report of Supervisory Board | Board of Management 74