ADT 2009 Annual Report Download - page 203

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Income Taxes (Continued)
accrued related to unrecognized tax benefits in income tax expense. Tyco had accrued interest and
penalties related to the unrecognized tax benefits of $50 million and $49 million as of September 25,
2009 and September 26, 2008, respectively. Tyco recognized $1 million and $9 million of income tax
expense for interest and penalties accrued related to unrecognized tax benefits as of September 25,
2009 and September 26, 2008, respectively.
A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows ($ in
millions):
Balance as of September 26, 2008 ................................ $369
Additions based on tax positions related to the current year ............ 10
Additions based on tax positions related to prior years ................ 6
Reductions based on tax positions related to prior years ............... (90)
Reduction related to settlements ................................ (4)
Reductions related to lapse of the applicable statute of limitations ....... (6)
Foreign currency translation adjustments .......................... (1)
Balance as of September 25, 2009 ................................ $284
Many of Tyco’s uncertain tax positions relate to tax years that remain subject to audit by the taxing
authorities in the U.S. federal, state and local or foreign jurisdictions. Open tax years in significant
jurisdictions are as follows:
Years Open
Jurisdiction To Audit
United States ........................................... 1997-2008
Australia ............................................... 2004-2008
France ................................................ 1999-2008
Germany ............................................... 1998-2008
United Kingdom ......................................... 2000-2008
Canada ................................................ 2000-2008
Based on the current status of its income tax audits, the Company does not anticipate a significant
change to its unrecognized tax benefits in the next twelve months.
Tax Sharing Agreement
In connection with the spin-offs of Covidien and Tyco Electronics from Tyco, Tyco entered into a
Tax Sharing Agreement that generally governs Covidien’s, Tyco Electronics’ and Tyco’s respective rights,
responsibilities, and obligations after the Separation with respect to taxes, including ordinary course of
business taxes and taxes, if any, incurred as a result of any failure of the distribution of all of the shares
of Covidien or Tyco Electronics to qualify as a tax-free distribution for U.S. federal income tax
purposes within the meaning of Section 355 of the Code or certain internal transactions undertaken in
anticipation of the spin-offs to qualify for tax-favored treatment under the Code.
Under the Tax Sharing Agreement, the Company shares responsibility for certain of Tyco’s,
Covidien’s and Tyco Electronics’ income tax liabilities, which result in cash payments, based on a
sharing formula for periods prior to and including June 29, 2007. More specifically, Tyco, Covidien and
Tyco Electronics share 27%, 42% and 31%, respectively, of shared income tax liabilities that arise from
2009 Financials 111