Ford 2011 Annual Report Download - page 161

Notes to the Financial Statements
Ford Motor Company | 2011 Annual Report 159
NOTE 22. INCOME TAXES (Continued)
We historically have provided deferred taxes for the presumed repatriation to the United States of earnings from
nearly all non-U.S. subsidiaries. During 2011, we determined that $6.9 billion of these non-U.S. subsidiaries' undistributed
earnings are now indefinitely reinvested outside the United States. As management has determined that the earnings of
these subsidiaries are not required as a source of funding for U.S. operations, such earnings are not planned to be
distributed to the U.S. in the foreseeable future. As a result of this change in assertion, deferred tax liabilities related to
undistributed foreign earnings decreased by $63 million.
As of December 31, 2011, $8.4 billion of non-U.S. earnings are considered indefinitely reinvested in operations
outside the United States, for which deferred taxes have not been provided. These earnings have been subject to
significant non-U.S. taxes; repatriation in their entirety would result in a residual U.S. tax liability of about $300 million.
At the end of 2011, our U.S. operations had returned to a position of cumulative profits for the most recent three-year
period. We concluded that this record of cumulative profitability in recent years, our ten consecutive quarters of pre-tax
operating profits, our successful completion of labor negotiations with the UAW, and our business plan showing continued
profitability, provide assurance that our future tax benefits more likely than not will be realized. Accordingly, at year-end
2011, we released almost all of our valuation allowance against net deferred tax assets for entities in the United States,
Canada, and Spain.
At December 31, 2011, we have retained a valuation allowance against approximately $500 million in North America
related to various state and local operating loss carryforwards that are subject to restrictive rules for future utilization, and
a valuation allowance totaling $1 billion primarily against deferred tax assets for our South American operations.
Components of Deferred Tax Assets and Liabilities
The components of deferred tax assets and liabilities at December 31 were as follows (in millions):
Deferred tax assets
Employee benefit plans
Net operating loss carryforwards
Tax credit carryforwards
Research expenditures
Dealer and customer allowances and claims
Other foreign deferred tax assets
Allowance for credit losses
All other
Total gross deferred tax assets
Less: valuation allowances
Total net deferred tax assets
Deferred tax liabilities
Leasing transactions
Deferred income
Depreciation and amortization (excluding leasing transactions)
Finance receivables
Other foreign deferred tax liabilities
All other
Total deferred tax liabilities
Net deferred tax assets/(liabilities)
2011
$8,189
3,163
4,534
2,297
1,731
694
194
1,483
22,285
(1,545)
20,740
932
2,098
1,659
551
360
711
6,311
$14,429
2010
$ 6,332
4,124
4,546
2,336
1,428
1,513
252
2,839
23,370
(15,664)
7,706
928
2,101
1,146
716
334
1,613
6,838
$868
Operating loss carryforwards for tax purposes were $8.5 billion at December 31, 2011, resulting in a deferred tax
asset of $3.2 billion. A substantial portion of these losses begin to expire in 2029; the remaining losses will begin to expire
in 2018. Tax credits available to offset future tax liabilities are $4.5 billion. A substantial portion of these credits have a
remaining carryforward period of 10 years or more. Tax benefits of operating loss and tax credit carryforwards are
evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible
carryforward period, and other circumstances.