Proctor and Gamble 2014 Annual Report Download - page 74

72 The Procter & Gamble Company
Amounts in millions of dollars except per share amounts or as otherwise specified.
considered indefinitely invested in the foreign subsidiaries.
If such earnings were repatriated, additional tax expense
may result. However, the calculation of the amount of
deferred U.S. income tax on these earnings is not practicable
because of the large number of assumptions necessary to
compute the tax.
A reconciliation of the beginning and ending liability for
uncertain tax positions is as follows:
Years ended June 30 2014 2013 2012
BEGINNING OF YEAR $ 1,600 $ 1,773 $ 1,848
Increases in tax positions for
prior years 146 162 166
Decreases in tax positions for
prior years (296) (225) (188)
Increases in tax positions for
current year 142 188 178
Settlements with taxing
authorities (135) (195) (49)
Lapse in statute of limitations (33) (98) (81)
Currency translation 13 (5) (101)
END OF YEAR 1,437 1,600 1,773
The Company is present in approximately 140 taxable
jurisdictions and, at any point in time, has 50-60
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, 2014, is $1.1 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, 2014, 2013
and 2012, we had accrued interest of $411, $413 and $439
and accrued penalties of $32, $34 and $66, respectively, that
are not included in the above table. During the fiscal years
ended June 30, 2014, 2013 and 2012, we recognized $(6),
$24 and $2 in interest benefit/(expense) and $2, $32 and $10
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 2014 2013
DEFERRED TAX ASSETS
Pension and postretirement benefits $ 2,045 $ 1,777
Stock-based compensation 1,060 1,125
Loss and other carryforwards 1,211 1,062
Goodwill and other intangible assets 49 60
Accrued marketing and promotion 258 285
Fixed assets 115 135
Unrealized loss on financial and
foreign exchange transactions 352 324
Accrued interest and taxes 66 15
Inventory 35 46
Other 809 879
Valuation allowances (384) (341)
TOTAL 5,616 5,367
DEFERRED TAX LIABILITIES
Goodwill and other intangible assets $ 11,428 $11,941
Fixed assets 1,665 1,718
Other 144 315
TOTAL 13,237 13,974
Net operating loss carryforwards were $3.6 billion and $3.1
billion at June 30, 2014 and 2013, respectively. If unused,
$1.5 billion will expire between 2015 and 2034. The
remainder, totaling $2.1 billion at June 30, 2014, 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