General Motors 2011 Annual Report Download - page 164

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We and Old GM established or released the following significant valuation allowances as a result of a change in our evaluation of
deferred tax asset realizability (dollars in millions):
Successor Predecessor
Year Ended
December 31, 2011
Year Ended
December 31, 2010
July 10, 2009
Through
December 31, 2009
January 1, 2009
Through
July 9, 2009
Established (released) by jurisdiction
Brazil ........................................... $ — $— $— $(465)
Variousnon-U.S. .................................. $ — $— $— $(286)
Australia ........................................ $(502) $— $— $ —
Old GM accumulated pre-tax losses in the U.S. and various non-U.S. jurisdictions. These historical pre-tax losses were driven by
several factors including but not limited to instability of the global economic environment, automotive price competition, relatively
high cost structure, unfavorable commodity prices, unfavorable regulatory and tax environments and a challenging foreign currency
exchange environment. By December 31, 2008, after weighing this objective and verifiable negative evidence with all other available
positive and negative evidence, Old GM determined it was more likely than not it would not realize its deferred tax assets, and
established valuation allowances for major jurisdictions including the U.S., Canada, Brazil, Australia, South Korea, Germany, Spain
and the United Kingdom. Additional concerns arose related to the U.S. parent company’s liquidity which led us to establish valuation
allowances for Texas and various non-U.S. jurisdictions, even though many of these jurisdictions had historical profits and no other
significant negative evidence factors.
In 2009 the U.S. parent company liquidity concerns were resolved in connection with the Chapter 11 Proceedings and the 363 Sale,
and many non-U.S. jurisdictions, including Brazil, were generating and projecting taxable income. To the extent there were no other
significant negative evidence factors, Old GM determined it was more likely than not it would realize its deferred tax assets and
reversed valuation allowances in Brazil and various non-U.S. jurisdictions.
Although we have a short history as a new company, and our ability to achieve future profitability was enhanced by the cost and
liability reductions that occurred as a result of the Chapter 11 Proceedings and 363 Sale, Old GM’s historic operating results remain
relevant as they are reflective of the industry and the effect of economic conditions. The fundamental businesses and inherent risks in
which we globally operate did not change from those in which Old GM operated. As such, subsequent to the Chapter 11 Proceedings
and the 363 Sale, due primarily to historical pre-tax losses, at December 31, 2011 we determined it was still more likely than not the
deferred tax assets would not be realized in major jurisdictions including the U.S., Canada, South Korea, Germany, Spain and the
United Kingdom. If additional positive evidence becomes available our conclusion regarding the need for full valuation allowances in
these jurisdictions could change, resulting in the reversal of some or all of the valuation allowances.
At December 31, 2011 we determined in Australia it was more likely than not we would realize deferred tax assets in the future due
primarily to sustained profitability and projected taxable income in an unlimited carryforward jurisdiction; accordingly, we reversed
the valuation allowance in this jurisdiction.
Uncertain Tax Positions
The following table summarizes gross unrecognized tax benefits before valuation allowances and the amount that would favorably
affect the effective tax rate in future periods after valuation allowances (dollars in millions):
Successor
December 31, 2011 December 31, 2010
Gross unrecognized tax benefits before valuation allowances ............................. $2,370 $5,169
Amount of unrecognized tax benefit that would favorably affect effective tax rate in future . . . . . $ 326 $ 785
Amount of liability for uncertain tax positions benefits netted against deferred tax assets in the
same jurisdiction (a) ........................................................... $1,285 $3,605
(a) The remaining uncertain tax positions are classified as current and non-current liabilities.
162 General Motors Company 2011 Annual Report