Proctor and Gamble 2013 Annual Report Download - page 74

72 The Procter & Gamble Company
Amounts in millions of dollars except per share amounts or as otherwise specified.
A reconciliation of the beginning and ending liability for
uncertain tax positions is as follows:
Years ended June 30 2013 2012 2011
BEGINNING OF YEAR $ 1,773 $ 1,848 $ 1,797
Increases in tax positions for
prior years 162 166 323
Decreases in tax positions for
prior years (225) (188) (388)
Increases in tax positions for
current year 188 178 222
Settlements with taxing
authorities (195) (49) (168)
Lapse in statute of limitations (98) (81) (94)
Currency translation (5) (101) 156
END OF YEAR 1,600 1,773 1,848
The Company is present in approximately 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, 2013, is $1.2 billion that, depending on the ultimate
resolution, could impact the effective tax rate in future
periods.
Accounting pronouncements require that, without discretion,
we recognize the additional accrual of any possible related
interest and penalties relating to the underlying uncertain tax
position in income tax expense, unless the Company
qualifies for a specific exception. As of June 30, 2013, 2012
and 2011, we had accrued interest of $413, $439 and $475
and accrued penalties of $34, $66 and $80, respectively, that
are not included in the above table. During the fiscal years
ended June 30, 2013, 2012 and 2011, we recognized $24, $2
and $197 in interest benefit and $32, $10 and $16 in
penalties benefit, respectively. The net benefits recognized
resulted primarily from the favorable resolution of tax
positions for prior years.
Deferred income tax assets and liabilities were comprised of
the following:
June 30 2013 2012
DEFERRED TAX ASSETS
Pension and postretirement benefits $ 1,777 $ 2,366
Stock-based compensation 1,125 1,304
Loss and other carryforwards 1,062 853
Goodwill and other intangible assets 60 78
Accrued marketing and promotion 285 238
Fixed assets 135 165
Unrealized loss on financial and
foreign exchange transactions 324 363
Accrued interest and taxes 15 28
Inventory 46 58
Other 879 761
Valuation allowances (341) (375)
TOTAL 5,367 5,839
DEFERRED TAX LIABILITIES
Goodwill and other intangible assets $11,941 $11,816
Fixed assets 1,718 1,719
Other 315 286
TOTAL 13,974 13,821
Net operating loss carryforwards were $3.1 billion and $2.8
billion at June 30, 2013 and 2012, respectively. If unused,
$1.4 billion will expire between 2014 and 2033. The
remainder, totaling $1.7 billion at June 30, 2013, may be
carried forward indefinitely.
NOTE 11
COMMITMENTS AND CONTINGENCIES
Guarantees
In conjunction with certain transactions, primarily
divestitures, we may provide routine indemnifications (e.g.,
indemnification for representations and warranties and
retention of previously existing environmental, tax and
employee liabilities) for which terms range in duration and,
in some circumstances, are not explicitly defined. The
maximum obligation under some indemnifications is also
not explicitly stated and, as a result, the overall amount of
these obligations cannot be reasonably estimated. Other
than obligations recorded as liabilities at the time of
divestiture, we have not made significant payments for these
indemnifications. We believe that if we were to incur a loss
on any of these matters, the loss would not have a material
effect on our financial position, results of operations or cash
flows.