Humana 2011 Annual Report Download - page 117

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Deferred income tax balances reflect the impact of temporary differences between the tax bases of assets or
liabilities and their reported amounts in our consolidated financial statements, and are stated at enacted tax rates
expected to be in effect when the reported amounts are actually recovered or settled. Principal components of our
net deferred tax balances at December 31, 2011 and 2010 were as follows:
Assets (Liabilities)
2011 2010
(in millions)
Net operating loss carryforward ...................... $181 $137
Future policy benefits payable ........................ 179 153
Benefits payable .................................. 111 89
Compensation and other accrued expenses .............. 95 127
Deferred acquisition costs ........................... 35 34
Capital loss carryforward ............................ 13 13
Unearned premiums ................................ 11 10
Other ........................................... 20 19
Total deferred income tax assets .............. 645 582
Valuation allowance ....................... (28) (28)
Total deferred income tax assets, net of valuation
allowance .............................. 617 554
Depreciable property and intangible assets .............. (347) (276)
Investment securities ............................... (191) (66)
Prepaid expenses .................................. (49) (47)
Total deferred income tax liabilities ........... (587) (389)
Total net deferred income tax assets ....... $ 30 $165
Amounts recognized in the consolidated balance sheets:
Other current assets ............................ $ 0 $ 76
Other long-term assets .......................... 46 89
Trade accounts payable and accrued expenses ....... (16) 0
Total net deferred income tax assets ....... $ 30 $ 165
At December 31, 2011, we had approximately $494 million of net operating losses to carry forward related
to prior acquisitions. These net operating loss carryforwards, if not used to offset future taxable income, will
expire from 2012 through 2031. A significant portion of these losses are in a subsidiary that will not be included
in the Humana Inc. consolidated tax return until 2013, and, therefore, may not be used until that point. Due to
limitations and uncertainty regarding our ability to use some of the carryforwards, a valuation allowance was
established on $77 million of net operating loss carryforwards related to prior acquisitions. For the remainder of
the net operating loss carryforwards, based on our historical record of producing taxable income and profitability,
we have concluded that future operating income will be sufficient to give rise to tax expense to recover all
deferred tax assets.
We file income tax returns in the United States and certain foreign jurisdictions. The U.S. Internal Revenue
Service, or IRS, has completed its examinations of our consolidated income tax returns for 2010 and prior years.
Our 2011 tax returns are under advance review by the IRS under its Compliance Assurance Process, or CAP.
With few exceptions, which are immaterial in the aggregate, we no longer are subject to state, local and foreign
tax examinations for years before 2008. As of December 31, 2011, we are not aware of any material adjustments
that may be proposed.
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