ADT 2009 Annual Report Download - page 202

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Income Taxes (Continued)
Deferred income taxes result from temporary differences between the amount of assets and
liabilities recognized for financial reporting and tax purposes. The components of the net deferred
income tax asset as of September 25, 2009 and September 26, 2008 are as follows ($ in millions):
2009 2008
Deferred tax assets:
Accrued liabilities and reserves ........................ $ 264 $ 364
Tax loss and credit carryforwards ...................... 1,767 1,567
Postretirement benefits .............................. 300 253
Deferred revenue .................................. 250 248
Other .......................................... 439 403
3,020 2,835
Deferred tax liabilities:
Property, plant and equipment ........................ (507) (547)
Intangibles assets .................................. (346) (349)
Other .......................................... (170) (148)
(1,023) (1,044)
Net deferred tax asset before valuation allowance ............ 1,997 1,791
Valuation allowance ................................. (791) (742)
Net deferred tax asset .............................. $1,206 $ 1,049
As of September 25, 2009, the Company had $4,869 million of net operating loss carryforwards in
certain non-U.S. jurisdictions. Of these, $3,385 million have no expiration, and the remaining
$1,484 million will expire in future years through 2028. In the U.S., there were approximately
$1,883 million of federal and $1,536 million of state net operating loss carryforwards as of
September 25, 2009, which will expire in future years through 2028.
The valuation allowance for deferred tax assets of $791 million and $742 million as of
September 25, 2009 and September 26, 2008, respectively, relates principally to the uncertainty of the
utilization of certain deferred tax assets, primarily tax loss and credit carryforwards in various
jurisdictions. The valuation allowance was calculated and recorded when the Company determined that
it was more-likely-than-not that all or a portion of our deferred tax assets would not be realized. The
Company believes that it will generate sufficient future taxable income to realize the tax benefits
related to the remaining net deferred tax assets on our Consolidated Balance Sheets.
The Company and its subsidiaries’ income tax returns periodically are examined by various tax
authorities.
Tyco adopted the recognition, measurement and disclosure guidance for the accounting of
uncertain income tax positions on September 29, 2007. As a result of this adoption, Tyco increased its
reserve for uncertain tax positions by $55 million and reduced its deferred tax assets by $24 million
with a corresponding $79 million cumulative effect of adoption adjustment to shareholders’ equity. As
of the adoption date, Tyco had unrecognized tax benefits of $370 million, of which $241 million, if
recognized would affect the effective tax rate. As of September 25, 2009 and September 26, 2008, Tyco
had unrecognized tax benefits of $284 million and $369 million, respectively, of which $224 million and
$248 million, if recognized, would affect the effective tax rate. Tyco recognizes interest and penalties
110 2009 Financials