Walgreens 2015 Annual Report Download - page 108

The following table provides a reconciliation of the total amounts of unrecognized tax benefits (in millions):
2015 2014 2013
Balance at beginning of year $193 $208 $197
Gross increases related to business combination 84 — —
Gross increases related to tax positions in a prior period 45 55 18
Gross decreases related to tax positions in a prior period (75) (82) (32)
Gross increases related to tax positions in the current period 63 46 30
Settlements with taxing authorities (45) (22) (2)
Lapse of statute of limitations (4) (12) (3)
Balance at end of year $261 $193 $208
At August 31, 2015, 2014 and 2013, $227 million, $105 million and $116 million, respectively, of unrecognized
tax benefits would favorably impact the effective tax rate if recognized. During the next twelve months, based on
current knowledge, it is reasonably possible the amount of unrecognized tax benefits could decrease by up to $73
million due to anticipated tax audit settlements and the expirations of statutes of limitations associated with tax
positions related to multiple tax jurisdictions.
The Company recognizes interest and penalties in the income tax provision in its Consolidated Statements of
Earnings. At August 31, 2015, and August 31, 2014, the Company had accrued interest and penalties of $36
million and $21 million, respectively. For the year ended August 31, 2015, the amount reported in income tax
expense related to interest and penalties was $3 million.
The Company files a consolidated U.S. federal income tax return as well as income tax returns in various states
and multiple foreign jurisdictions. It is generally no longer under audit examination for U.S. federal income tax
purposes for any years prior to fiscal 2014. With few exceptions, it is no longer subject to state and local income
tax examinations by tax authorities for years before fiscal 2007. In foreign tax jurisdictions, the Company is
generally no longer subject to examination by the tax authorities in Luxembourg prior to 2010, in Germany prior
to 2011, in France prior to 2009, and in Turkey prior to 2010. With respect to the United Kingdom, a number of
specific issues remain open to examination by the tax authorities back to 2000.
The Company has received tax holidays from Swiss cantonal income taxes relative to certain of its Swiss
operations. The income tax holidays are expected to extend through September 2022. The holidays had a
beneficial impact of approximately $89 million during 2015. This benefit is primarily included as part of the
foreign income taxed at non-U.S. rates line in the effective tax rate reconciliation table above.
At August 31, 2015, it is not practicable for the Company to determine the amount of the unrecognized deferred
tax liability it has with respect to temporary differences related to investments in foreign subsidiaries and foreign
corporate joint ventures that are essentially permanent in duration.
15. Stock Compensation Plans
The Walgreens Boots Alliance, Inc. Omnibus Incentive Plan (the “Omnibus Plan”) which became effective in
fiscal 2013, provides for incentive compensation to the Company’s non-employee directors, officers and
employees, and consolidates into a single plan several previously existing equity compensation plans. A total of
60.4 million shares became available for delivery under the Omnibus Plan.
In connection with the Reorganization, the Omnibus Plan was assumed by the Company and each Walgreens
stock option, restricted stock unit award, performance share award, deferred stock unit award, and share of
common stock converted automatically into an award with respect to the number of shares of common stock of
the Company on a one-for-one basis. The Company’s awards continue to be subject to the same terms and
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