content_image/74755.jpg content_image/74756.jpg content_image/74757.jpg content_image/74760.jpg content_image/74758.jpg content_image/74759.jpg
Following are the gross components of deferred tax assets and liabili- ties as of December 31, 2004 and 2003: 

<img src='content_image/74755.jpg'>

The deferred tax assets (current and non-current) and liabilities recog- nized in the Company’s Consolidated Balance Sheets are as follows: 

<img src='content_image/74756.jpg'>

The other non-current assets are primarily comprised of amounts from the U.S., France and Korea. The other long-term liabilities are primarily comprised of amounts from Germany, Italy, U.K., Japan, and Canada. The non-current deferred tax asset in 2003 of $48.5 million was previously presented as a reduction of the non-current deferred tax liability; this amount has been reclassified to other non-current assets on the 2003 Consolidated Balance Sheets and the reclassification is not material to the Company’s Consolidated Financial Statements. 

The foreign tax credits will expire beginning in 2012 through 2014. The R&D tax credits will expire beginning in 2022 through 2024. The company also has deferred tax assets for minimum tax credits of $3.2 million, which can be carried forward indefinitely. 

No deferred income taxes have been provided on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries or foreign corporate joint ventures totaling $353.9 million in 2004, as these amounts are essentially permanent 

in nature. The excess amount will become taxable on a repatriation of assets or sale or liquidation of the investment. It is not practicable to determine the unrecognized deferred tax liability on the excess amount because the actual tax liability on the excess amount, if any, is dependent on circumstances existing when remittance occurs. 

## NOTE 5 BALANCE SHEET INFORMATION 

Detailed balance sheet data are as follows: 

<img src='content_image/74757.jpg'>

## NSK-Warner 

The Company has a 50% interest in NSK-Warner, a joint venture based in Japan that manufactures automatic transmission components. The Company’s share of the earnings or losses reported by NSK-Warner is accounted for using the equity method of accounting. NSK-Warner has a fiscal year-end of March 31. The Company’s equity in the earn- ings of NSK-Warner consists of the 12 months ended November 30 so as to reflect earnings on as current a basis as is reasonably 

feasible. NSK-Warner is the joint venture partner with a 40% interest in the Drivetrain Group’s Korean subsidiary, BorgWarner Transmission Systems Korea Inc. Dividends received from NSK-Warner were $23.9 million in 2004, $9.7 million in 2003, and $8.4 million in 2002. 

Following are summarized financial data for NSK-Warner, translated using the ending or periodic rates as of and for the years ended November 30, 2004, 2003 and 2002 (unaudited): 

<img src='content_image/74760.jpg'>

The equity of NSK-Warner as of November 30, 2004, was $278.3 million, there was no debt and their cash and securities were $92.4 million. 

Purchases from NSK-Warner for the years ended December 31, 2004, 2003 and 2002 were $19.9 million, $16.9 million and $15.1 million, respectively. 

## NOTE 6 NOTES PAYABLE AND LONG-TERM DEBT 

Following is a summary of notes payable and long-term debt. The weighted average interest rate on all borrowings for 2004 and 2003 was 5.1% and 4.9%, respectively. 

<img src='content_image/74758.jpg'>

(a) The $11.5 million impact of derivatives on debt from the interest rate swaps as of December 31, 2003 has been reclassified to long-term debt with a corresponding non-current asset. The reclassification is not material to the Company’s Consolidated Financial Statements. 

## Investment in business held for sale 

The Company’s investment in Aktiengesellschaft Kühnle, Kopp & Kausch (AGK), an unconsolidated subsidiary of the Company, has been recorded in “Investment in business held for sale” in the Consolidated Balance Sheets. Effective February 17, 2005, the Company signed a Share Transfer Agreement (STA) for the sale of its 95.42% interest in AGK with Turbo Group GmbH. The STA will become effective no later than seven (7 banking days after receipt of approval from both the German Fed e ral Cartel Office and the Austrian merger control authority. The tr ansaction is anticipated to close before March 31, 2005. The proc e eds, net of closing costs, are expected to be approximately € 39 . 8 million. The investment is carried on a cost basis, with dividends  r eceived from AGK applied against the carrying value of the asset. 

Following is summarized balance sheet dat a as of September 30, 2004 and 2003 for AGK (unaudited), which is th e l atest available. The assets and liabilities reported in Euros were tran slated using the respective year-end exchange rate: 

<img src='content_image/74759.jpg'>

