ADT 2010 Annual Report Download - page 195

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Income Taxes (Continued)
excess of its agreed-upon share of Tyco’s, Covidien’s and Tyco Electronics’ tax liabilities. See Note 12
for further discussion of guarantees and indemnifications extended between Tyco, Covidien and Tyco
Electronics.
Except for earnings that are currently distributed, no additional material provision has been made
for U.S. or non-U.S. income taxes on the undistributed earnings of subsidiaries or for unrecognized
deferred tax liabilities for temporary differences related to investments in subsidiaries, since the
earnings are expected to be permanently reinvested, the investments are essentially permanent in
duration, or the Company has concluded that no additional tax liability will arise as a result of the
distribution of such earnings. A liability could arise if amounts are distributed by such subsidiaries or if
such subsidiaries are ultimately disposed. It is not practicable to estimate the additional income taxes
related to permanently reinvested earnings or the basis differences related to investments in
subsidiaries.
7. Earnings Per Share
As discussed in Note 1, the Company adopted the authoritative guidance for determining whether
instruments granted in share-based payment transactions are participating securities in the first quarter
of fiscal 2010. The Company historically issued certain restricted stock awards that vest over a period of
three years which contained non-forfeitable rights to dividends and should be treated as participating
securities. These types of awards were last issued during fiscal 2006. Awards containing such rights that
are unvested are considered to be participating securities and are included in the computation of
earnings per share pursuant to the two-class method. All of these awards were vested as of
September 25, 2009. As a result, the Company is not required to compute earnings per share for fiscal
2010 using the two-class method unless new awards are granted. The retrospective application of this
guidance did not have an impact on the Company’s historically reported earnings per share for 2009 as
the effects would be anti-dilutive because the Company reported a loss from continuing operations. In
addition, the retrospective application of this guidance for 2008 did not have an impact on the
Company’s historically reported earnings per share.
2010 Financials 107