Pfizer 2009 Annual Report Download - page 66

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
For a discussion about the sales of the biopharmaceutical companies, legal settlements and costs associated with the Wyeth
acquisition, see the “Taxes on Income” section above. For a discussion about the resolution of certain tax positions, see the “Tax
Contingencies” section below. On October 3, 2008, the Tax Extenders and Alternative Minimum Tax Relief Act (the Extenders Act)
extended the R&D tax credit from January 1, 2008, through December 31, 2009. As of December 31, 2009, the credit has expired.
The charges for acquired IPR&D in 2009, 2008 and 2007 are primarily not deductible.
C. Deferred Taxes
Deferred taxes arise as a result of basis differentials between financial statement accounting and tax amounts. The tax effect of the
major items recorded as deferred tax assets and liabilities, shown before jurisdictional netting, as of December 31 is as follows:
2009 DEFERRED TAX 2008 DEFERRED TAX
(MILLIONS OF DOLLARS) ASSETS (LIABILITIES) ASSETS (LIABILITIES)
Prepaid/deferred items $ 1,330 $ (60) $ 1,000 $ (152)
Inventories 437 (859) 102 (43)
Intangibles 949 (19,802) 872 (5,727)
Property, plant and equipment 715 (2,014) 205 (996)
Employee benefits 4,786 (66) 3,414 (585)
Restructurings and other charges 884 (8) 841 (5)
Legal and product liability reserves 1,010 — 703 (104)
Net operating loss/credit carryforwards 4,658 — 3,065 —
Unremitted earnings — (7,057) — (4,471)
State and local tax adjustments 747 — 585 —
All other 744 (187) 905 (389)
Subtotal 16,260 (30,053) 11,692 (12,472)
Valuation allowance (353) — (194) —
Total deferred taxes $15,907 $(30,053) $11,498 $(12,472)
Net deferred tax liability $(14,146) $ (974)
Classified in our Consolidated Balance Sheet as follows:
DEFERRED TAX ASSET/
(LIABILITY)
DEFERRED TAX ASSET/
(LIABILITY)
Current:
Current deferred tax assets and other current assets $ 2,591 $ 1,143
Current deferred tax liabilities and other current
liabilities (226) (414)
Noncurrent:
Noncurrent deferred tax assets and other noncurrent
assets 1,328 1,256
Noncurrent deferred tax liabilities (17,839) (2,959)
Net deferred tax liability $(14,146) $ (974)
The increase in the net deferred tax liability position in 2009 compared to 2008 was primarily due to the noncurrent deferred tax
liabilities related to identifiable intangible assets established in connection with our acquisition of Wyeth as well as the increase in
noncurrent deferred tax liabilities on unremitted earnings, partially offset by the net deferred tax assets acquired, and net deferred
tax assets established as a result of various restructuring charges incurred in connection with our acquisition of Wyeth.
We have carryforwards, primarily related to foreign tax credit carryovers and net operating loss carryovers, which are available to
reduce future U.S. federal and state, as well as international income taxes payable with either an indefinite life or expiring at various
times between 2010 and 2028. Certain of our U.S. net operating losses are subject to limitations under Internal Revenue Code
Section 382.
Valuation allowances are provided when we believe that our deferred tax assets are not recoverable based on an assessment of
estimated future taxable income that incorporates ongoing, prudent, feasible tax planning strategies.
As of December 31, 2009, we have not made a U.S. tax provision on approximately $42.5 billion of unremitted earnings of our
international subsidiaries. As of December 31, 2009, these earnings are intended to be permanently reinvested overseas; as such, it
is not practical to compute the estimated deferred tax liability on these permanently reinvested earnings.
D. Tax Contingencies
Unrecognized tax benefits represent liabilities that we have recorded for the difference between the estimated tax benefits
recognized in our financial statements and tax positions taken or expected to be taken on our tax returns. These unrecognized tax
benefits are recorded due to the uncertainty of the ultimate outcome of tax positions taken on our tax returns. Because tax laws and
64 2009 Financial Report