Ford 2012 Annual Report Download - page 141

Ford Motor Company | 2012 Annual Report 139
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 24. INCOME TAXES (Continued)
We historically have provided deferred taxes for the presumed repatriation to the United States of earnings from
nearly all non-U.S. subsidiaries. During 2011, we determined that $6.9 billion of these non-U.S. subsidiaries' undistributed
earnings are now indefinitely reinvested outside the United States. As management has determined that the earnings of
these subsidiaries are not required as a source of funding for U.S. operations, such earnings are not planned to be
distributed to the United States in the foreseeable future. As a result of this change in assertion, deferred tax liabilities
related to undistributed foreign earnings decreased by $63 million.
As of December 31, 2012, $6.6 billion of non-U.S. earnings are considered indefinitely reinvested in operations
outside the United States, for which deferred taxes have not been provided. These earnings have been subject to
significant non-U.S. taxes; repatriation in their entirety would result in a residual U.S. tax liability of about $600 million.
At the end of 2011, our U.S. operations had returned to a position of cumulative profits for the most recent 3-year
period. We concluded that this record of cumulative profitability in recent years, our ten consecutive quarters of pre-tax
operating profits, our successful completion of labor negotiations with the UAW, and our business plan showing continued
profitability provided assurance that our future tax benefits more likely than not would be realized. Accordingly, at year-
end 2011, we released almost all of our valuation allowance against net deferred tax assets for entities in the United
States, Canada, and Spain.
At December 31, 2012, we have retained a valuation allowance against approximately $500 million in North America
related to various state and local operating loss carryforwards that are subject to restrictive rules for future utilization, and
a valuation allowance totaling $1.4 billion primarily against deferred tax assets for our South American operations.
Components of Deferred Tax Assets and Liabilities
The components of deferred tax assets and liabilities were as follows (in millions):
December 31,
2012
December 31,
2011
Deferred tax assets
Employee benefit plans $ 8,079 $ 8,189
Net operating loss carryforwards 2,417 3,163
Tax credit carryforwards 4,973 4,534
Research expenditures 2,321 2,297
Dealer and customer allowances and claims 1,820 1,731
Other foreign deferred tax assets 1,790 694
Allowance for credit losses 146 194
All other 1,176 1,483
Total gross deferred tax assets 22,722 22,285
Less: valuation allowances (1,923)(1,545)
Total net deferred tax assets 20,799 20,740
Deferred tax liabilities
Leasing transactions 1,145 932
Deferred income 2,094 2,098
Depreciation and amortization (excluding leasing transactions) 1,561 1,659
Finance receivables 616 551
Other foreign deferred tax liabilities 379 360
All other 289 711
Total deferred tax liabilities 6,084 6,311
Net deferred tax assets/(liabilities) $ 14,715 $ 14,429
Operating loss carryforwards for tax purposes were $6.9 billion at December 31, 2012, resulting in a deferred tax
asset of $2.4 billion. A substantial portion of these losses begin to expire in 2029; the remaining losses will begin to expire
in 2018. Tax credits available to offset future tax liabilities are $5 billion. A substantial portion of these credits have a
remaining carryforward period of 10 years or more. Tax benefits of operating loss and tax credit carryforwards are
evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible
carryforward period, and other circumstances.
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