Proctor and Gamble 2008 Annual Report Download - page 74

Amountsinmillionsofdollarsexceptpershareamountsorasotherwisespecied.
72 TheProcter&GambleCompany NotestoConsolidatedFinancialStatements
NOTE 10

UnderSFAS109,“AccountingforIncomeTaxes,”incometaxesare
recognizedfortheamountoftaxespayableforthecurrentyearand
fortheimpactofdeferredtaxliabilitiesandassets,whichrepresent
futuretaxconsequencesofeventsthathavebeenrecognizeddifferently
inthenancialstatementsthanfortaxpurposes.Deferredtaxassets
andliabilitiesareestablishedusingtheenactedstatutorytaxratesand
areadjustedforanychangesinsuchratesintheperiodofchange.
Earningsbeforeincometaxesconsistedofthefollowing:
YearsendedJune30   2007 2006
UnitedStates    $ 9,138 $ 7,410
International   5,572 5,003
 14,710 12,413
Theincometaxprovisionconsistedofthefollowing:
YearsendedJune30   2007 2006

U.S.federal   $2,667 $1,961
International   1,325 1,702
U.S.stateandlocal   125 178
   4,117 3,841

U.S.federal   231 226
Internationalandother   22 (338)
   253 (112)
 4,370 3,729
AreconciliationoftheU.S.federalstatutoryincometaxratetoour
actualincometaxrateisprovidedbelow:
YearsendedJune30   2007 2006
U.S.federalstatutory
incometaxrate   35.0% 35.0%
Countrymiximpactsof
foreignoperations   -4.3% -3.6%
Incometaxreserveadjustments  -0.3% -1.5%
Other   -0.7% 0.1%
  29.7% 30.0%
Incometaxreserveadjustmentsrepresentchangesinestimated
exposuresrelatedtoprioryeartaxpositions.
AsdiscussedinNote1,onJuly1,2007,weadoptedFASBInterpretation
No.48,“AccountingforUncertaintyinIncomeTaxes”(FIN48).The
adoptionofFIN48resultedinadecreasetoretainedearningsasof
July1,2007,of$232,whichwasreectedasacumulativeeffectofa
changeinaccountingprinciple,withacorrespondingincreasetothe
netliabilityforunrecognizedtaxbenets.Theimpactprimarilyreects
theaccrualofadditionalstatutoryinterestandpenaltiesasrequired
byFIN48,partiallyoffsetbyadjustmentstoexistingunrecognizedtax
benetstocomplywithFIN48measurementprinciples.Theimple-
mentationofFIN48alsoresultedinareductioninournettaxliabilities
foruncertaintaxpositionsrelatedtoprioracquisitionsaccountedfor
underpurchaseaccounting,resultinginan$80decreasetogoodwill.
Additionally,theCompanyhistoricallyclassiedunrecognizedtax
benetsincurrenttaxespayable.AsaresultoftheadoptionofFIN48,
unrecognizedtaxbenetsnotexpectedtobepaidinthenext12months
werereclassiedtoothernoncurrentliabilities.
Areconciliationofthebeginningandendingamountofunrecognized
taxbenetsisasfollows:


Increasesintaxpositionsforprioryears   
Decreasesintaxpositionsforprioryears   
Increasesintaxpositionsforcurrentyear   
Settlementswithtaxingauthorities   
Lapseinstatuteoflimitations    
Currencytranslation    

Includedinthetotalunrecognizedtaxbenetsis$1,563that,if
recognized,wouldimpacttheeffectivetaxrateinfutureperiods.
Werecognizeaccruedinterestandpenaltiesrelatedtounrecognized
taxbenetsinincometaxexpense.Accruedinterestandpenalties
asofJune30,2008,were$656and$155,respectively,andarenot
includedintheabovetable.DuringthescalyearendedJune30,2008,
werecognized$213and$35ininterestandpenalties,respectively.
TheCompanyispresentinover140taxablejurisdictions,andat
anypointintime,has30–40auditsunderwayatvariousstagesof
completion.Weevaluateourtaxpositionsandestablishliabilitiesfor
uncertaintaxpositionsthatmaybechallengedbylocalauthorities
andmaynotbefullysustained,despiteourbeliefthattheunderlying
taxpositionsarefullysupportable.Uncertaintaxpositionsarereviewed
onanongoingbasisandareadjustedinlightofchangingfactsand
circumstances,includingprogressoftaxaudits,developmentsin
caselaw,andclosingofstatuteoflimitations.Suchadjustmentsare
reectedinthetaxprovisionasappropriate.TheCompanyhasmade
aconcertedefforttobringitsauditinventorytoamorecurrentposition.
Wehavedonethisbyworkingwithtaxauthoritiestoconductaudits
forseveralopenyearsatonce.Wehavetaxyearsopenrangingfrom
1997andforward.Wehave$318relatedtouncertaintaxpositions
classiedascurrent,forwhichweexpectsettlementtobemadein
thenext12months.Fortheremaininguncertaintaxpositions,itis
difcultatthistimetoestimatethetimingoftheresolution.Inaddition,
wearegenerallynotabletoreliablyestimatetheultimatesettlement
amountsuntilthecloseoftheaudit.Whilewedonotexpectmaterial
changes,itispossiblethattheamountofunrecognizedbenetwith
respecttoouruncertaintaxpositionswillsignicantlyincreaseor
decreasewithinthenext12monthsrelatedtotheauditsdescribed