GE 2015 Annual Report Download - page 202

FINANCIAL STATEMENTS INCOME TAXES
174 GE 2015 FORM 10-K
The balance of unrecognized tax benefits, the amount of related interest and penalties we have provided and what we believe to be the
range of reasonably possible changes in the next 12 months were:
UNRECOGNIZED TAX BENEFITS
December 31
(
In millions
)
2015 2014
Unrecognized tax benefits $ 6,778 $ 5,619
Portion that, if recognized, would reduce tax expense and effective tax rate(a) 4,723 4,059
A
ccrued interest on unrecognized tax benefits 805 807
A
ccrued penalties on unrecognized tax benefits 98 103
Reasonably possible reduction to the balance of unrecognized tax benefits
in succeeding 12 months 0-700 0-900
Portion that, if recognized, would reduce tax expense and effective tax rate(a) 0-200 0-300
(a) Some portion of such reduction may be reported as discontinued operations.
UNRECOGNIZED TAX BENEFITS RECONCILIATION
(In millions) 2015 2014
Balance at January 1 $ 5,619 $ 5,816
Additions for tax positions of the current year 720 234
Additions for tax positions of prior years 1,296 673
Reductions for tax positions of prior years (754) (761)
Settlements with tax authorities (70) (305)
Expiration of the statute of limitations (33) (38)
Balance at December 31 $ 6,778 $ 5,619
For 2015, the amount shown as ³DGGLWLRQV for tax positions of prior \HDUV´ relates primarily ($1,054 million) to the preliminary estimate of
uncertain tax liabilities for acquired Alstom businesses. Of the total 2015 additions for tax positions of prior years, $445 million relates
to amounts that would not affect tax expense if recognized.
We classify interest on tax deficiencies as interest expense; we classify income tax penalties as provision for income taxes. For the
years ended December 31, 2015, 2014 and 2013, $48 million, $(68) million and $22 million of interest expense (income), respectively,
and $(4) million, $(45) million and an insignificant amount of tax expense (income) related to penalties, respectively, were recognized in
the Statement of Earnings.
DEFERRED INCOME TAXES
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and
their tax bases, as well as from net operating loss and tax credit carryforwards, and are stated at enacted tax rates expected to be in
effect when taxes are actually paid or recovered. Deferred income tax assets represent amounts available to reduce income taxes
payable on taxable income in future years. We evaluate the recoverability of these future tax deductions and credits by assessing the
adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating
earnings and available tax planning strategies. To the extent we do not consider it more likely than not that a deferred tax asset will be
recovered, a valuation allowance is established.
We have not provided U.S. deferred taxes on cumulative earnings of non-U.S. affiliates and associated companies that have been
reinvested indefinitely. These earnings relate to ongoing operations and, at December 31, 2015 and 2014, were approximately $104
billion and $119 billion, respectively. Most of these earnings have been reinvested in active non-U.S. business operations and we do
not intend to repatriate these earnings to fund U.S. operations. Because of the availability of U.S. foreign tax credits, it is not practicable
to determine the U.S. federal income tax liability that would be payable if such earnings were not reinvested indefinitely. Deferred taxes
are provided for earnings of non-U.S. affiliates and associated companies when we plan to remit those earnings.
174 GE 2015 FORM 10-K