Lowe's 2015 Annual Report Download - page 66

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57
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)
2015
2014
2013
Unrecognized tax benefits, beginning of year
$
7
$
62
$
63
Additions for tax positions of prior years
—
2
—
Reductions for tax positions of prior years
(2
)
(57
)
—
Settlements
(2
)
—
(1
)
Unrecognized tax benefits, end of year
$
3
$
7
$
62
The amounts of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate were $2 million and
$4 million as of January 29, 2016, and January 30, 2015, respectively.
The Company recognized $1 million of interest income related to uncertain tax positions during 2015 and 2014. The Company
recognized $6 million of interest expense related to uncertain tax positions during 2013. As of January 29, 2016 and
January 30, 2015, the Company had accrued interest related to uncertain tax positions of $1 million and $2 million,
respectively. Penalties recognized related to uncertain tax positions were insignificant for 2015, 2014, and 2013. Accrued
penalties were also insignificant as of January 29, 2016 and January 30, 2015.
The Company is subject to examination by various foreign and domestic taxing authorities. During 2015, the Company’s 2012
Federal tax return was audited by the Internal Revenue Service. This limited scope audit resulted in an assessment of $14
million. It is reasonably possible that the Company will resolve $3 million in state related audit items within the next 12
months. There are ongoing U.S. state audits covering tax years 2008 to 2014. An audit of the Company’s Canadian operations
by the Canada Revenue Agency for fiscal years 2009 and 2010 was closed during the year with no assessment being rendered.
The Company remains subject to income tax examinations for international income taxes for fiscal years 2007 through 2014.
The Company believes appropriate provisions for all outstanding issues have been made for all jurisdictions and all open years.
Note 11: Earnings Per Share
The Company calculates basic and diluted earnings per common share using the two-class method. Under the two-class
method, net earnings are allocated to each class of common stock and participating security as if all of the net earnings for the
period had been distributed. The Company’s participating securities consist of share-based payment awards that contain a
nonforfeitable right to receive dividends and, therefore, are considered to participate in undistributed earnings with common
shareholders.