Proctor and Gamble 2012 Annual Report Download - page 72
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Please find page 72 of the 2012 Proctor and Gamble annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.70 The Procter & Gamble Company
Amounts in millions of dollars except per share amounts or as otherwise specified.
A reconciliation of the U.S. federal statutory income tax rate
to our actual income tax rate on continuing operations is
provided below:
Years ended June 30 2012 2011 2010
U.S. federal statutory income
tax rate 35.0 % 35.0 % 35.0 %
Country mix impacts of
foreign operations (8.1)% (8.2)% (7.7)%
Changes in uncertain tax
positions (1.3)% (3.6)% (0.4)%
Patient Protection and
Affordable Care Act —% — % 1.0 %
Impairment Adjustments 3.7 % —% —%
Other (2.2)% (1.2)% (0.9)%
EFFECTIVE INCOME
TAX RATE 27.1 % 22.0 % 27.0 %
Changes in uncertain tax positions represent changes in our
net liability related to prior year tax positions.
In March 2010, the Patient Protection and Affordable Care
Act (PPACA) was signed into law. One of the provisions of
the PPACA changed the taxability of federal subsidies
received by plan sponsors that provide retiree prescription
drug benefits at least equivalent to Medicare Part D
coverage. As a result of the change in taxability of the
federal subsidy, we were required to make adjustments to
deferred tax asset balances, resulting in a $152 charge to
income tax expense in 2010.
Tax benefits credited to shareholders' equity totaled $661
and $510 for the years ended June 30, 2012 and 2011,
respectively. These primarily relate to the tax effects of net
investment hedges, excess tax benefits from the exercise of
stock options and the impacts of certain adjustments to
pension and other retiree benefit obligations recorded in
shareholders' equity.
We have undistributed earnings of foreign subsidiaries of
approximately $39 billion at June 30, 2012, for which
deferred taxes have not been provided. Such earnings are
considered indefinitely invested in the foreign subsidiaries.
If such earnings were repatriated, additional tax expense
may result, although the calculation of such additional taxes
is not practicable.
A reconciliation of the beginning and ending liability for
uncertain tax positions is as follows:
2012 2011 2010
BEGINNING OF YEAR $ 1,848 $ 1,797 $ 2,003
Increases in tax positions for
prior years 166 323 128
Decreases in tax positions for
prior years (188) (388) (146)
Increases in tax positions for
current year 178 222 193
Settlements with taxing
authorities (49) (168) (216)
Lapse in statute of limitations (81) (94) (45)
Currency translation (101) 156 (120)
END OF YEAR 1,773 1,848 1,797
The Company is present in over 150 taxable jurisdictions
and, at any point in time, has 40-50 jurisdictional 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 reflected in
the tax provision as appropriate. The Company is making 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 2002 and forward. 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
benefit with respect to our uncertain tax positions will
significantly increase or decrease within the next 12 months
related to the audits described above. At this time, we are not
able to make a reasonable estimate of the range of impact on
the balance of uncertain tax positions or the impact on the
effective tax rate related to these items.
Included in the total liability for uncertain tax positions at
June 30, 2012, is $1.4 billion that, depending on the ultimate
resolution, could impact the effective tax rate in future
periods.
We recognize accrued interest and penalties related to
uncertain tax positions in income tax expense. As of June 30,
2012, 2011 and 2010, we had accrued interest of $439, $475
and $622 and penalties of $66, $80 and $89, respectively,
that are not included in the above table. During the fiscal
years ended June 30, 2012, 2011 and 2010, we recognized
$(2), $(197) and $38 in interest expense/(benefit) and $(10) ,
$(16) and $(8) in penalties expense/(benefit), respectively.