Walmart 2014 Annual Report Download - page 55

Eective Income Tax Rate Reconciliation
The Company’s eective income tax rate is typically lower than the U.S.
statutory tax rate primarily because of benets from lower-taxed global
operations, including the use of global funding structures and certain
U.S. tax credits as further discussed in the “Cash and Cash Equivalents”
section of the Company’s signicant accounting policies in Note 1. The
Company’s non-U.S. income is generally subject to local country tax rates
that are below the 35% U.S. statutory tax rate. Certain non-U.S. earnings
have been indenitely reinvested outside the U.S. and are not subject to
current U.S. income tax. A reconciliation of the signicant dierences
between the U.S. statutory tax rate and the eective income tax rate on
pretax income from continuing operations is as follows:
Fiscal Years Ended January 31,
2014 2013 2012
U.S. statutory tax rate 35.0% 35.0% 35.0%
U.S. state income taxes, net of
federal income tax benet 2.0% 1.7% 2.0%
Income taxed outside the U.S. (2.8)% (2.6)% (2.8)%
Net impact of repatriated
international earnings (1.4)% (2.5)% (0.3)%
Other, net 0.1% (0.6)% (1.3)%
Eective income tax rate 32.9% 31.0% 32.6%
Deferred Taxes
The signicant components of the Company’s deferred tax account
balances are as follows:
January 31,
(Amounts in millions) 2014 2013
Deferred tax assets:
Loss and tax credit carryforwards $ 3,566 $ 3,525
Accrued liabilities 2,986 2,683
Share-based compensation 126 204
Other 1,573 1,500
Total deferred tax assets 8,251 7,912
Valuation allowances (1,801) (2,225)
Deferred tax assets, net of valuation allowance 6,450 5,687
Deferred tax liabilities:
Property and equipment 6,295 5,830
Inventories 1,641 1,912
Other 1,827 1,157
Total deferred tax liabilities 9,763 8,899
Net deferred tax liabilities $ 3,313 $ 3,212
The deferred taxes are classied as follows in the Company’s
Consolidated Balance Sheets:
January 31,
(Amounts in millions) 2014 2013
Balance Sheet classification:
Assets:
Prepaid expenses and other $ 822 $ 520
Other assets and deferred charges 1,151 757
Asset subtotals 1,973 1,277
Liabilities:
Accrued liabilities 176 116
Deferred income taxes and other 5,110 4,373
Liability subtotals 5,286 4,489
Net deferred tax liabilities $3,313 $3,212
Unremitted Earnings
United States income taxes have not been provided on accumulated
but undistributed earnings of the Company’s international subsidiaries
of approximately $21.4 billion and $19.2 billion as of January 31, 2014
and 2013, 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
practicable because of the complexities with its hypothetical calculation.
The Company provides deferred or current income taxes on earnings of
international subsidiaries in the period that the Company determines it
will remit those earnings.
Net Operating Losses, Tax Credit Carryforwards
and Valuation Allowances
At January 31, 2014, the Company had net operating loss and capital loss
carryforwards totaling approximately $6.1 billion. Of these carryforwards,
approximately $3.6 billion will expire, if not utilized, in various years
through 2024. The remaining carryforwards have no expiration. At
January 31, 2014, the Company had foreign tax credit carryforwards of
$1.8 billion, which will expire in various years through 2024, if not utilized.
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. If 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.
Walmart 2014 Annual Report 53
Notes to Consolidated Financial Statements