partnering for the future December 31, (US$ in millions) 2004 2003 Deferred income tax assets: Net operating loss carry-forwards $ 4 48 82 2 $ 386 Excess of tax basis over financial statement  basis of property, plant and equipment 5 55 65 Accrued retirement costs (pension  and postretirement cost) and other  accrued employee compensation 5 59 9 43 Other accruals and reserves not currently  deductible for tax purposes 1 19 94 4 161 Tax credit carry-forwards 1 15 5 12 Other 5 51 1 63 Total deferred tax assets 8 85 56 6 730 Less valuation allowance ((1 17 77 7)) (107) Net deferred tax assets 6 67 79 9 623 Deferred tax liabilities:  Excess of financial statement basis over tax  basis of property, plant and equipment 3 36 66 6 344 Undistributed earnings of affiliates 1 12 29 9 125 Other 8 86 6 76 Total deferred tax liabilities 5 58 81 1 545 Net deferred tax assets $ 9 98 8 $ 78 At December 31, 2004, Bunge’s gross tax loss carry-forwards totaled $1,510 million, of which $272 million have no expiration. However, applicable income tax regulations limit some of these tax losses available for offset of future taxable income to 30%  of annual pretax income. The remaining tax loss carry-forwards expire at various periods beginning in 2005 through the year 2024. Bunge continually reviews the adequacy of its valuation allowance and recognizes tax benefits only as reassessment indicates that it is more likely than not that the benefits will be realized. The majority of the valuation allowances relate to net operating loss carry-forwards in certain of its non-U.S. subsidiaries where there is an uncertainty regarding their realization and will more likely than not expire unused. In 2004, Bunge merged several European subsidiaries, which generated statutory tax losses and the recog- nition of $60 million of net operating loss carry-forwards. Bunge increased its valuation allowance by $60 million as it is more likely than not that the assets will not be realized. In 2003, Bunge decreased its valuation allowance by $16 million, which resulted from the utilization of net operating loss carry-forwards by its Brazilian and Argentine subsidiaries. Bunge was able to recognize cash and cash equivalents, trade accounts receivable, accounts payable and short-term debt The carrying value approximates the fair value because of the short-term maturity of these instruments. All investment instruments with a maturity of three months or less are considered cash equivalents. fair value of financial instruments The carrying amounts and fair values of financial instruments were as follows: these net operating carry-forwards because of increased statutory taxable income of these subsidiaries caused by effects of the  real and  peso appreciation and a change in South American tax law. In 2004, 2003 and 2002, Bunge paid income taxes, net of refunds, of $210 million, $112 million and $14 million, respectively. In addi- tion, in 2004 Bunge offset income taxes payable of $95 million against recoverable taxes receivable in certain South American jurisdictions in accordance with the applicable local tax laws. Bunge uses various financial instruments in its operations, including certain components of working capital such as cash and cash equivalents, trade accounts receivable and accounts payable. Additionally, Bunge uses short-term and long-term debt to fund operating requirements and derivative financial instruments to manage its foreign exchange and commodity price risk expo- sures. The counter-parties to these debt financial instruments are primarily major financial institutions and Banco Nacional de Desenvolvimento Econômico e Social (“BNDES”) of the Brazilian government, or in the case of commodity futures and options, a commodity exchange. Cash and cash equivalents, trade accounts receivable and accounts payables, marketable securities, short- term debt and all derivative instruments are carried at fair value. The fair values of all of Bunge’s derivative instruments are based on quoted market prices and rates and are reflected as marked- to-market adjustments to the carrying value in the consolidated financial statements. December 31, (US$ in millions) 2004 2003 Carrying Fair Carrying Fair Value Value Value Value Marketable securities $ 1 14 4 $ 1 14 4 $ 13 $ 13 Long-term debt,  including current portion 2 2,,7 74 40 0 2 2,,8 89 95 5 2,505 2,746 69 15. financial instruments