Walmart 2011 Annual Report Download - page 47

Walmart 2011 Annual Report 45
The deferred taxes noted above are classied as follows in the
accompanying Consolidated Balance Sheets:
January31,
(Amounts in millions) 2011 2010
Balance Sheet Classication:
Assets:
Prepaid expenses and other $1,636 $1,534
Other assets and deferred charges 327 331
Asset subtotals 1,963 1,865
Liabilities:
Accrued liabilities 17 34
Deferred income taxes and other 3,641 2,722
Liability subtotals 3,658 2,756
Net deferred tax liabilities $1,695 $ 891
Unremitted Earnings
United States income taxes have not been provided on accumulated
but undistributed earnings of the Company’s international subsidiaries of
approximately $17.0 billion and $13.7 billion as of January 31, 2011 and
2010, respectively, as the Company intends to permanently reinvest these
amounts outside of the United States. However, if any portion were to be
distributed, the related U.S. tax liability may be reduced by foreign
income taxes paid on those earnings. Determination of the unrecognized
deferred tax liability related to these undistributed earnings is not prac-
ticable because of the complexities with its hypothetical calculation.
Net Operating Losses, Tax Credit Carryforwards
and Valuation Allowances
At January 31, 2011, the Company had U.S. capital loss carryforwards
of $776 million and international net operating loss and capital loss
carryforwards totaling approximately $4.1 billion. The U.S. capital loss
carryforward will expire, if not utilized, in 2012. Of the international
carryforwards, approximately $2.3 billion will expire, if not utilized,
in various years through 2021. The remaining international carryforwards
have no expiration. At January 31, 2011, the Company had foreign tax
credit carryforwards of $1.3 billion, which will expire in various years
through 2021 if not utilized.
As of January 31, 2011, the Company has provided a valuation allowance
of approximately $2.9 billion on deferred tax assets associated primarily
with net operating loss and capital loss carryforwards for which manage-
ment has determined it is more likely than not that the deferred tax asset
will not be realized. The $732 million net change in the valuation allow-
ance during scal 2011 related to releases arising from the use of net
operating loss carryforwards, increases in capital loss carryforwards,
international net operating losses arising in scal 2011 and uctuations
in currency exchange rates. Management believes that it is more likely
than not that the remaining deferred tax assets will be fully realized.
Uncertain Tax Positions
The benets of uncertain tax positions are recorded in our nancial
statements only after determining a more-likely-than-not probability
that the uncertain tax positions will withstand challenge, if any, from
taxing authorities.
As of January 31, 2011 and 2010, the amount of unrecognized tax benets
related to continuing operations was $795 million and $1.0 billion, respec-
tively, of which, the amount of unrecognized tax benets that would aect
the Company’s eective tax rate is $687 million and $671 million for Janu-
ary 31, 2011 and 2010, respectively.
A reconciliation of unrecognized tax benets from continuing operations
is as follows:
Fiscal Years Ended January 31,
(Amounts in millions) 2011 2010 2009
Unrecognized tax benet,
beginning of year $1,019 $1,017 $ 868
Increases related to prior year
tax positions 101 129 296
Decreases related to prior year
tax positions (61) (33) (34)
Increases related to current year
tax positions 199 246 129
Settlements during the period (453) (340) (238)
Lapse in statutes of limitations (10) — (4)
Unrecognized tax benet,
end of year
$ 795 $1,019 $1,017
The Company classies interest and penalties related to uncertain tax
benets as interest expense and as operating, selling, general and
administrative expenses, respectively. During scal 2011, 2010 and 2009,
the Company recognized interest related to uncertain tax positions of
$45 million, $88 million and $109 million, respectively. At January 31, 2011
and 2010, the Company had accrued interest related to uncertain tax
positions of $205 million and $231 million, respectively, and $2 million
of accrued penalties. There were no changes to accrued penalties
recognized during the year.
During the next twelve months, it is reasonably possible that tax
audit resolutions could reduce unrecognized tax benets by between
$330 million and $420 million, either because the tax positions are sus-
tained on audit or because the Company agrees to their disallowance.
The Company does not expect any change to have a signicant impact
on our consolidated nancial statements.
The Company is subject to income tax examinations for its U.S. federal
income taxes generally for the scal years 2009 through 2011. The
Company is also subject to income tax examinations for international
income taxes for the tax years 2003 through 2010, and for state and local
income taxes for the scal years generally 2006 through 2009.
Discontinued Operations
At January 31, 2010, the Company had an unrecognized tax benet of
$1.7 billion related to an ordinary worthless stock deduction from the scal
2007 disposition of its German operations. During the fourth quarter of scal
2011, this matter was eectively settled with the Internal Revenue Service,
which resulted in the reclassication of the deduction as an ordinary loss,
a capital loss that the Company has fully oset with a valuation allowance,
and a reduction in the accumulated but undistributed earnings of an inter-
national subsidiary. In connection with this settlement, the Company recorded
a $1.0 billion tax benet in discontinued operations on our Consolidated
Statements of Income (see Note 15) and a reduction of our accrued income
tax liability in our Consolidated Balance Sheet at January 31, 2011.
Notes to Consolidated Financial Statements