Lowe's 2013 Annual Report Download - page 62

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54
The tax effects of cumulative temporary differences that gave rise to the deferred tax assets and liabilities were as follows:
(In millions)
January 31,
2014
February 1,
2013
Deferred tax assets:
Self-insurance
$
384
$
375
Share-based payment expense
70
73
Deferred rent
80
80
Net operating losses
148
131
Other, net
138
113
Total deferred tax assets
820
772
Valuation allowance
(164
)
(142
)
Net deferred tax assets
656
630
Deferred tax liabilities:
Property
(646
)
(783
)
Other, net
(49
)
(85
)
Total deferred tax liabilities
(695
)
(868
)
Net deferred tax liability
$
(39
)
$
(238
)
The Company operates as a branch in various foreign jurisdictions and cumulatively has incurred net operating losses of $547
million and $474 million as of January 31, 2014, and February 1, 2013, respectively. The net operating losses are subject to
expiration in 2017 through 2033. Deferred tax assets have been established for these foreign net operating losses in the
accompanying consolidated balance sheets. Given the uncertainty regarding the realization of foreign net deferred tax assets,
the Company recorded cumulative valuation allowances of $164 million and $142 million at January 31, 2014, and February 1,
2013, respectively.
The Company has not provided for deferred income taxes on approximately $51 million of undistributed earnings of
international subsidiaries because of its intention to indefinitely reinvest these earnings outside the U.S. It is not practicable to
determine the income tax liability that would be payable on these earnings. The Company will provide for deferred or current
income taxes on such earnings in the period it determines requisite to remit those earnings.
A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows:
(In millions)
2013
2012
2011
Unrecognized tax benefits, beginning of year
$
63
$
146
$
165
Additions for tax positions of prior years
—
20
11
Reductions for tax positions of prior years
—
(3
)
(19
)
Additions based on tax positions related to the current year
—
—
19
Settlements
(1
)
(100
)
(30
)
Unrecognized tax benefits, end of year
$
62
$
63
$
146
The amounts of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate were $62 million
and $4 million as of January 31, 2014, and February 1, 2013, respectively.
During 2013, the Company recognized $6 million of interest expense and an insignificant decrease in penalties related to
uncertain tax positions. As of January 31, 2014, the Company had $6 million of accrued interest and an insignificant amount of
accrued penalties. During 2012, the Company recognized $27 million of interest income and an insignificant decrease in
penalties related to uncertain tax positions. As of February 1, 2013, the Company had $12 million of accrued interest and an
insignificant amount of accrued penalties. During 2011, the Company recognized $8 million of interest expense and an
insignificant decrease in penalties related to uncertain tax positions.