McDonalds 2010 Annual Report Download - page 40

The following table presents a reconciliation of the beginning
and ending amounts of unrecognized tax benefits:
In millions 2010 2009
Balance at January 1 $492.0 $272.5
Decreases for positions taken in prior years (27.1) (16.4)
Increases for positions taken in prior years 53.3 21.8
Increases for positions related to the current
year
Increases with deferred tax offset 16.3 83.9
Other increases 85.7 178.0
Settlements with taxing authorities (17.4) (20.8)
Lapsing of statutes of limitations (30.2) (27.0)
Balance at December 31(1)(2) $572.6 $492.0
(1) This balance is before consideration of the deferred tax accounting offsets
(2) Of the 2010 balance, $435.9 is included in long-term liabilities, $115.2 is included in
income taxes payable, and $21.5 is included in deferred income taxes on the Con-
solidated balance sheet. Of the 2009 balance, $285.6 is included in long-term
liabilities and $206.4 is included in deferred income taxes on the Consolidated bal-
ance sheet.
In 2010, the Internal Revenue Service (IRS) concluded its
field examination of the Company’s U.S. federal income tax
returns for 2007 and 2008. As part of this exam, the Company
has resolved proposed adjustments related to transfer pricing
matters that were previously received from the IRS. The tax
provision impact associated with the completion of this field
examination was not significant. The Company continues to dis-
agree with the IRS’ proposed adjustments related to certain
foreign tax credits of about $400 million, excluding interest and
potential penalties. The Company continues to believe that these
adjustments are not justified, and intends to pursue all available
remedies. While the Company cannot predict with certainty the
timing of resolution, we do not believe that it is reasonably possi-
ble that these issues will be settled in the next twelve months.
The Company does not believe the resolution will have a material
impact on its results of operations or cash flows. Excluding these
adjustments, it is reasonably possible that the total amount of
unrecognized tax benefits could decrease within the next 12
months by $25 million to $40 million. This decrease would result
from the expiration of the statute of limitations and the com-
pletion of tax audits in multiple tax jurisdictions.
The Company is generally no longer subject to U.S. federal,
state and local, or non-U.S. income tax examinations by tax
authorities for years prior to 2004.
The continuing practice of the Company is to recognize inter-
est and penalties related to income tax matters in the provision
for income taxes. The Company had $44.4 million and $18.7 mil-
lion accrued for interest and penalties at December 31, 2010
and 2009, respectively. The Company recognized interest and
penalties related to tax matters of $29.0 million in 2010,
$1.5 million in 2009, and $13.7 million in 2008.
Deferred U.S. income taxes have not been recorded for
temporary differences related to investments in certain foreign
subsidiaries and corporate joint ventures. These temporary
differences were approximately $11.0 billion at December 31,
2010 and consisted primarily of undistributed earnings consid-
ered permanently invested in operations outside the U.S.
Determination of the deferred income tax liability on these
unremitted earnings is not practicable because such liability, if
any, is dependent on circumstances existing if and when
remittance occurs.
Segment and Geographic Information
The Company operates in the global restaurant industry and
manages its business as distinct geographic segments. All inter-
company revenues and expenses are eliminated in computing
revenues and operating income. Corporate general & admin-
istrative expenses are included in Other Countries & Corporate
and consist of home office support costs in areas such as facili-
ties, finance, human resources, information technology, legal,
marketing, restaurant operations, supply chain and training.
Corporate assets include corporate cash and equivalents, asset
portions of financial instruments and home office facilities.
In millions 2010 2009 2008
U.S. $ 8,111.6 $ 7,943.8 $ 8,078.3
Europe 9,569.2 9,273.8 9,922.9
APMEA 5,065.5 4,337.0 4,230.8
Other Countries &
Corporate 1,328.3 1,190.1 1,290.4
Total revenues $24,074.6 $22,744.7 $23,522.4
U.S. $ 3,446.5 $ 3,231.7 $ 3,059.7
Europe 2,796.8 2,588.1 2,608.0
APMEA 1,199.9(1) 989.5 818.8
Other Countries &
Corporate 29.9(2) 31.7(3) (43.6)
Total operating income $ 7,473.1 $ 6,841.0 $ 6,442.9
U.S. $10,467.7 $10,429.3 $10,356.7
Europe 11,360.7 11,494.4 10,532.7
APMEA 5,374.0 4,409.0 4,074.6
Other Countries &
Corporate 4,772.8 3,892.2 3,497.5
Total assets $31,975.2 $30,224.9 $28,461.5
U.S. $ 530.5 $ 659.4 $ 837.4
Europe 978.5 859.3 864.1
APMEA 493.1 354.6 360.6
Other Countries &
Corporate 133.4 78.8 73.6
Total capital expenditures $ 2,135.5 $ 1,952.1 $ 2,135.7
U.S. $ 433.0 $ 423.8 $ 400.9
Europe 500.5 483.2 506.3
APMEA 232.4 202.9 193.4
Other Countries &
Corporate 110.3 106.3 107.2
Total depreciation and
amortization $ 1,276.2 $ 1,216.2 $ 1,207.8
(1) Includes expense due to Impairment and other charges (credits), net of $39.3 million
related to the Company’s share of restaurant closing costs in McDonald’s Japan (a
50%-owned affiliate).
(2) Includes income due to Impairment and other charges (credits), net of $21.0 million
related to the resolution of certain liabilities retained in connection with the 2007
Latin America developmental license transaction.
(3) Includes income due to Impairment and other charges (credits), net of $65.2 million
primarily related to the resolution of certain liabilities retained in connection with the
2007 Latin America developmental license transaction.
Total long-lived assets, primarily property and equipment,
were (in millions) – Consolidated: 2010–$26,700.9; 2009–
$25,896.1; 2008–$24,385.8;. U.S. based: 2010–$10,430.2;
2009–$10,376.4; 2008–$10,389.7.
38 McDonald’s Corporation Annual Report 2010