Verizon Wireless 2008 Annual Report Download - page 68

66
Notes to Consolidated Financial Statements continued
FASB Interpretation No. 48
FIN 48 prescribes the recognition, measurement and disclosure
standards for uncertainties in income tax positions. A reconciliation
of the beginning and ending balance of unrecognized tax benefits is
as follows:
(dollars in millions)
2008 2007
Balance at January 1, $ 2,883 $ 2,958
Additions based on tax positions related
to the current year 251 141
Additions for tax positions of prior years 344 291
Reductions for tax positions of prior years (651) (420)
Settlements (126) (11)
Lapses of statutes of limitations (79) (76)
Balance at December 31, $ 2,622 $ 2,883
Included in the total unrecognized tax benefits at December 31, 2008
and 2007 is $1,631 million and $1,245 million, respectively, that if recog-
nized, would favorably affect the effective income tax rate. Of the $1,631
million at December 31, 2008, $383 million of unrecognized tax benefits
are from a prior acquisition and pursuant to SFAS No. 141(R), if recog-
nized, would favorably affect the effective income tax rate.
We recognize any interest and penalties accrued related to unrecog-
nized tax benefits in income tax expense. During 2008 we recognized
a net after tax benefit in the income statement related to interest and
penalties of approximately $55 million. We had approximately $538 mil-
lion (after-tax) and $598 million (after-tax) for the payment of interest
and penalties accrued in the balance sheets at December 31, 2008 and
December 31, 2007, respectively.
During the year ended December 31, 2007, we recognized approximately
$175 million (after-tax) in the income statement for the payment of
interest and penalties. We had approximately $598 million (after-tax)
and $444 million (after-tax) for the payment of interest and penalties
accrued in the balance sheet at December 31, 2007 and January 1,
2007, respectively.
Verizon or one of its subsidiaries files income tax returns in the U.S. fed-
eral jurisdiction, and various state, local and foreign jurisdictions. The
Company is generally no longer subject to U.S. federal, state and local,
or non-U.S. income tax examinations by tax authorities for years before
2004. The Internal Revenue Service (IRS) will begin its examination of the
Company’s U.S. income tax returns for years 2004 through 2006 in the
first quarter of 2009. As a result of the anticipated resolution of various
income tax audits within the next twelve months, we believe that it is
reasonably possible that the amount of unrecognized tax benefits will
decrease. An estimate of the range of the possible change cannot be
made until issues are further developed.
NOTE 17
SEGMENT INFORMATION
Reportable Segments
We have two reportable segments, which we operate and manage
as strategic business units and organize by products and services. We
previously measured and evaluated our reportable segments based
on segment income. Beginning in 2008, we measure and evaluate our
reportable segments based on segment operating income, which is
reflected in all periods presented. The use of segment operating income
is consistent with the chief operating decision makers’ assessment of
segment performance.
Corporate, eliminations and other includes unallocated corporate
expenses, intersegment eliminations recorded in consolidation, the
results of other businesses such as our investments in unconsolidated
businesses, lease financing, and other adjustments and gains and losses
that are not allocated in assessing segment performance due to their
non-recurring or non-operational nature. Although such transactions
are excluded from the business segment results, they are included
in reported consolidated earnings. Gains and losses that are not
individually significant are included in all segment results, since these
items are included in the chief operating decision makers’ assessment
of segment performance.
The below reconciliation of segment operating revenues and expenses
to consolidated operating revenues and expenses also include those
items of a non-recurring or non-operational nature. We exclude from
segment results the effects of certain items that management does not
consider in assessing segment performance, primarily because of their
non-recurring or non-operational nature.
In 2008, we completed the spin-off of our local exchange and related
business assets in Maine, New Hampshire and Vermont. Accordingly,
Wireline results from divested operations, including the impact of the
non strategic assets sold during the first quarter of 2007, have been
reclassified to Corporate and Other and reflect comparable operating
results. In 2007, we completed the sale of our 52% interest in TELPRI and
our interest in CANTV. In 2006, we closed the sale of Verizon Dominicana.
Consequently, with these three transactions, we completed the disposi-
tion of our International segment. Also in 2006, we completed the spin-off
of our Information Services segment which included our domestic print
and Internet yellow pages directories business. For further information
concerning the disposition of the International and Information Services
segments, see Note 3.
Our segments and their principal activities consist of the following:
Segment Description
Domestic Wireless Domestic Wireless’s products and services include wire-
less voice, data services and other value-added services
and equipment sales across the United States.
Wireline Wireline’s communications services include voice,
Internet access, broadband video and data, next genera-
tion Internet Protocol network services, network access,
long distance and other services. We provide these ser-
vices to consumers, carriers, businesses and government
customers both in the United States and internationally
in 150 countries.