Walmart 2013 Annual Report Download - page 51

Walmart 2013 Annual Report || 49
Net Operating Losses, Tax Credit Carryforwards
and Valuation Allowances
At January 31, 2013, the Company had net operating loss and capital loss
carryforwards totaling approximately $5.5 billion. Of these carryforwards,
approximately $3.2 billion will expire, if not utilized, in various years
through 2023. The remaining carryforwards have no expiration. At
January 31, 2013, the Company had foreign tax credit carryforwards of
$1.7 billion, which will expire in various years through 2023, if not utilized.
As of January 31, 2013 and 2012, the Company had a valuation allowance
recorded of approximately $2.2 billion and $2.5 billion, respectively,
on deferred tax assets associated primarily with net operating loss
carryforwards for which management has determined it is more likely
than not that the deferred tax asset will not be realized. The $0.3 billion
net decrease in the valuation allowance during  scal 2013 related to
releases arising from the use of net operating loss and capital loss
carryforwards, increases from certain net operating losses arising in
 scal 2013, decreases due to operating and capital loss expirations and
 uctuations in currency exchange rates. Management believes that it is
more likely than not that the remaining net deferred tax assets will be
fully realized.
The recoverability of these future tax deductions and credits is evaluated
by assessing the adequacy of future expected taxable income from
all sources, including taxable income in prior carryback years, reversal
of taxable temporary di erences, forecasted operating earnings and
available tax planning strategies. To the extent management does not
consider it more likely than not that a deferred tax asset will be realized,
a valuation allowance is established. To the extent that a valuation
allowance has been established and management subsequently
determines that it is more likely than not that the deferred tax assets
will be realized, the valuation allowance is released.
Uncertain Tax Positions
The bene ts of uncertain tax positions are recorded in the Company’s
Consolidated Financial 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, 2013 and 2012, the amount of unrecognized tax bene ts
related to continuing operations was $818 million and $611 million,
respectively. The amount of unrecognized tax bene ts that would a ect
the Company’s e ective income tax rate is $741 million and $520 million
for January 31, 2013 and 2012, respectively.
A reconciliation of unrecognized tax bene ts from continuing operations
is as follows:
Fiscal Years Ended January 31,
(Amounts in millions) 2013 2012 2011
Unrecognized tax bene ts,
beginning of year $ 611 $ 795 $1,019
Increases related to prior year
tax positions 88 87 101
Decreases related to prior year
tax positions (232) (162) (61)
Increases related to current year
tax positions 431 56 199
Settlements during the period (80) (161) (453)
Lapse in statutes of limitations — (4) (10)
Unrecognized tax bene ts,
end of year $ 818 $ 611 $ 795
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 2013, 2012 and 2011,
the Company recognized interest and penalty expense (bene t) related
to uncertain tax positions of $2 million, $(19) million and $45 million,
respectively. As of January 31, 2013 and 2012, accrued interest related to
uncertain tax positions of $139 million and $166 million, respectively,
were recorded in the Company’s Consolidated Balance Sheets. The
Company did not have any accrued penalties recorded as of January 31,
2013 or 2012.
During the next twelve months, it is reasonably possible that tax
audit resolutions could reduce unrecognized tax bene ts by between
$165 million and $210 million, either because the tax positions are sus-
tained on audit or because the Company agrees to their disallowance.
The Company is focused on resolving tax audits as expeditiously as
possible. As a result of these e orts, unrecognized tax bene ts could
potentially be reduced beyond the provided range during the next
twelve months. The Company does not expect any change to have a
signi cant impact to its Consolidated Financial Statements.
The Company remains subject to income tax examinations for its
U.S. federal income taxes generally for  scal 2011 through 2013.
The Company also remains subject to income tax examinations for
international income taxes for  scal 2005 through 2013, and for
U.S. state and local income taxes generally for  scal 2006 through 2013.
Other Taxes
The Company is subject to tax examinations for payroll, value added,
sales-based and other non-income taxes. A number of these exam-
inations are ongoing and, in certain cases, have resulted in assessments
from the taxing authorities. Where appropriate, the Company has made
accruals for these matters, which are re ected in the Company’s
Consolidated Financial Statements. While these matters are individually
immaterial, a group of related matters, if decided adversely to the
Company, may result in a liability material to the Company’s Consolidated
Financial Statements.
Notes to Consolidated Financial Statements