Walmart 2009 Annual Report Download - page 43

41Wal-Mart 2009 Annual Report
Deferred Taxes
Items that give rise to signi cant portions of the deferred tax
accounts are as follows:
January 31,
(Amounts in millions) 2009 2008
Deferred tax assets:
International operating and
capital loss carryforwards
$ 1,430 $ 1,073
Accrued liabilities 2,548 2,400
Equity compensation 206 324
Other 374 516
Total deferred tax assets 4,558 4,313
Valuation allowance (1,852) (1,589)
Deferred tax assets, net of
valuation allowance
$ 2,706 $ 2,724
Deferred tax liabilities:
Property and equipment $ 3,257 $ 2,740
Inventories 1,079 705
Other (25) 41
Total deferred tax liabilities $ 4,311 $ 3,486
Net deferred tax liabilities $ 1,605 $ 762
The deferred taxes noted above are classi ed as follows in the
balance sheet:
January 31,
(Amounts in millions) 2009 2008
Balance Sheet Classi cation:
Prepaid expenses and other $1,293 $1,425
Other assets and deferred charges 202 327
Total assets 1,495 1,752
Accrued liabilities 24 165
Deferred income taxes and other 3,076 2,349
Total liabilities 3,100 2,514
Net deferred tax liabilities $1,605 $ 762
E ective Tax Rate Reconciliation
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,
2009 2008 2007
Statutory tax rate 35.00% 35.00% 35.00%
State income taxes, net of
federal income tax bene t 1.89% 1.72% 1.80%
Income taxes outside
the United States -1.66% -1.56% -1.90%
Other -1.04% -0.98% -1.40%
E ective income tax rate 34.19% 34.18% 33.50%
Unremitted Earnings
United States income taxes have not been provided on accumulated
but undistributed earnings of its non-U.S. subsidiaries of approximately
$12.7 billion and $10.7 billion as of January 31, 2009 and 2008, respec-
tively, as the Company intends to permanently reinvest these amounts.
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 of its hypothetical calculation.
Losses and Valuation Allowances
At January 21, 2009, the Company had international net operating
loss and capital loss carryforwards totaling approximately $4.1 billion.
Of these carryforwards, $2.4 billion will expire in various years through
2016. The remaining carryforwards have no expiration.
As of January 31, 2009, the Company has provided a valuation allow-
ance of approximately $1.9 billion on deferred tax assets associated
primarily with net operating loss and capital loss carryforwards from
our international operations for which management has determined
it is more likely than not that the deferred tax asset will not be realized.
The $263 million net change in the valuation allowance in  scal 2009
related to releases arising from the use of net operating loss carry-
forwards, increases in foreign net operating losses arising in  scal 2009
and  uctuations in foreign currency exchange rates. Management
believes that it is more likely than not that we will fully realize the
remaining domestic and international deferred tax assets.
During  scal 2007, the Company recorded a pretax loss of $918 million
and recognized a tax bene t of $126 million on the disposition of its
German operations. The Company recorded an additional loss on this
disposition of $153 million during  scal year 2008. See Note 6, Acqui-
sitions and Disposals, for additional information about this transaction.
The Company has claimed the tax loss realized on the disposition of
its German operations as an ordinary worthless stock deduction. The
Internal Revenue Service has challenged the characterization of this
deduction. If the loss is characterized as a capital loss, any such capital
loss could only be realized by being o set against future capital gains
and would expire in 2012. Any deferred tax asset, net of its related
valuation allowance, resulting from the characterization of the loss
as capital may be included with the Company’s non-current assets of
discontinued operations. Final resolution of the amount and charac-
ter of the deduction may result in the recognition of additional tax
bene ts of up to $1.7 billion which may be included in discontinued
operations in future periods.
FASB Interpretation No. 48
The Company adopted the provisions of Financial Accounting
Standards Board Interpretation No. 48, “Accounting for Uncertainty
in Income Taxes,” (“FIN 48”) e ective February 1, 2007. FIN 48 clari es
the accounting for income taxes by prescribing a minimum recogni-
tion threshold a tax position is required to meet before being recog-
nized in the  nancial statements. FIN 48 also provides guidance on
de-recognition, measurement, classi cation, interest and penalties,
accounting in interim periods, disclosure and transition. As a result of
the implementation of FIN 48, the Company recognized a $236 mil-
lion increase in the liability for unrecognized tax bene ts relating to