Proctor and Gamble 2015 Annual Report Download - page 69

67 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 une 0 2015 2014 201
U.S. federal statutory
income tax rate 5.0  35.0  35.0 
Country mix impacts of
foreign operations 1.9 (11.1) (7.8)
Changes in uncertain tax
positions 0. (1.6) (1.9)
Impairment adjustments    0.6 
Holding gain on joint
venture buy-out    (1.5)
enezuela deconsolidation
charge .2   
Other 1.9 (1.2) (1.6)
EFFECTIVE INCOME
TAX RATE 24.  21.1  22.8 
Changes in uncertain tax positions represent changes in our net
liability related to prior year tax positions. Country mix
impacts of foreign operations includes the effects of foreign
subsidiaries' earnings taxed at rates other than the U.S. statutory
rate, the U.S. tax impacts of non-U.S. earnings repatriation and
any net impacts of intercompany transactions.
Tax costs charged to shareholders' equity totaled $634 for the
year ended June 30, 2015. This primarily relates to the tax
effects of net investment hedges and the impact of certain
adjustments to pension obligations recorded in stockholders'
equity, partially offset by excess tax benefits from the exercise
of stock options. Tax benefits to shareholders' equity totaled
$716 for the year ended June 30, 2014. This primarily relates
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.
e have undistributed earnings of foreign subsidiaries of
approximately $45.0 billion at June 30, 2015, 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. 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 une 0 2015 2014 201
BEGINNING OF YEAR  1,4 $ 1,600 $ 1,773
Increases in tax positions
for prior years  146 162
Decreases in tax positions
for prior years 14 (296) (225)
Increases in tax positions
for current year 11 142 188
Settlements with taxing
authorities 250 (135) (195)
Lapse in statute of
limitations 2 (33) (98)
Currency translation 12 13 (5)
END OF YEAR  1,09 $ 1,437 $ 1,600
Included in the total liability for uncertain tax positions at
June 30, 2015, is $510 that, depending on the ultimate
resolution, could impact the effective tax rate in future periods.
The Company is present in approximately 140 taxable
jurisdictions and, at any point in time, has 60-70 jurisdictional
audits underway at various stages of completion. e 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. e have tax years open ranging from 2002 and
forward. e are generally not able to reliably estimate the
ultimate settlement amounts until the close of the audit. ased
on information currently available, we anticipate that over the
next 12 month period, audit activity could be completed related
to uncertain tax positions in multiple jurisdictions for which
we have accrued existing liabilities of approximately $445,
including interest and penalties.
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, 2015, 2014 and 2013,
we had accrued interest of $347, $411 and $413 and accrued
penalties of $19, $32 and $34, respectively, which are not
included in the above table. During the fiscal years ended
June 30, 2015, 2014 and 2013, we recognized $15, $(6) and
$24 in interest benefit(expense) and $13, $2 and $32 in
penalties benefit, respectively. The net benefits recognized
resulted primarily from the favorable resolution of tax
positions for prior years.