Walmart 2008 Annual Report Download - page 40

38 WAL-MART 2008 ANNUAL REPORT
Notes to Consolidated Financial Statements
The foreign currency translation amount includes a translation loss
of $9 million at January 31, 2008, and translations gains of $143 million
and $521 million at January 31, 2007 and 2006, respectively, related
to net investment hedges of our operations in the United Kingdom
and Japan.
In conjunction with the disposition of our operations in South
Korea and Germany, the Company reclassied $603 million from
foreign currency translation amounts included in accumulated
other comprehensive income into discontinued operations within
our Consolidated Statements of Income for scal year 2007.
5 Income Taxes
The income tax provision consists of the following (in millions):
Fiscal Year Ended January 31,
2008 2007 2006
Current:
Federal $5,145 $4,871 $4,646
State and local 524 522 449
International 1,247 883 837
Total current tax provision 6,916 6,276 5,932
Deferred:
Federal 12 (15) (62)
State and local 6 4 56
International (26) 100 (123)
Total deferred tax provision (8) 89 (129)
Total provision for income taxes $6,908 $6,365 $5,803
Income from continuing operations before income taxes and minority
interest by jurisdiction is as follows (in millions):
Fiscal Year Ended January 31,
2008 2007 2006
United States $15,820 $15,158 $14,447
Outside the United States 4,378 3,810 3,088
Total income from continuing
operations before income taxes
and minority interest $20,198 $18,968 $17,535
Items that give rise to significant portions of the deferred tax
accounts are as follows (in millions):
January 31,
2008 2007
Deferred tax liabilities:
Property and equipment $ 2,740 $ 3,153
Inventory 705 600
Other 41 282
Total deferred tax liabilities $ 3,486 $ 4,035
Deferred tax assets:
Net operating loss carryforwards $ 1,073 $ 865
Amounts accrued for nancial
reporting purposes not yet
deductible for tax purposes 2,400 2,233
Share-based compensation 324 300
Other 516 846
Total deferred tax assets 4,313 4,244
Valuation allowance (1,589) (1,307)
Total deferred tax assets,
net of valuation allowance $ 2,724 $ 2,937
Net deferred tax liabilities $ 762 $ 1,098
The change in the Company’s net deferred tax liability is impacted
by foreign currency translation.
A reconciliation of the signicant dierences between the eective
income tax rate and the federal statutory rate on pretax income is
as follows:
Fiscal Year Ended January 31,
2008 2007 2006
Statutory tax rate 35.00% 35.00% 35.00%
State income taxes, net of
federal income tax benet 1.72% 1.80% 1.85%
Income taxes outside the
United States -1.54% -1.84% -2.09%
Other -0.98% -1.40% -1.67%
Eective income tax rate 34.20% 33.56% 33.09%
United States income taxes have not been provided on accumulated
but undistributed earnings of its non-U.S. subsidiaries of $10.7 billion
and $8.7 billion as of January 31, 2008 and 2007, respectively as the
Company intends to permanently reinvest these undistributed earn-
ings. However, if any portion were to be distributed, the related U.S. tax
liability may be reduced by foreign income taxes paid on those earn-
ings. Determination of the unrecognized deferred tax liability related
to these undistributed earnings is not practicable because of the
complexities with its hypothetical calculation.
The Company had foreign net operating loss carryforwards of
$2.9 billion at January 31, 2008 and $2.3 billion at January 31, 2007.
Of these amounts, $1.9 billion relate to pre-acquisition losses for
which a valuation allowance has been recorded. Any tax benet
ultimately realized upon the release of this portion of the valuation
allowance will be accounted for as an adjustment to goodwill. Net
operating loss carryforwards of $1.7 billion will expire in various