ADT 2011 Annual Report Download - page 130

September 30, 2011, which reflects the Company’s current estimate of the number of viable claims
made against it, its affiliates or entities for which it has assumed responsibility in connection with
acquisitions or divestitures. This amount includes adjustments for claims that are not actively being
prosecuted, identify incorrect defendants or are duplicative of other actions.
For a detailed discussion of asbestos-related matters, see Note 15 of the Consolidated Financial
Statements.
Income Tax Matters
In connection with the 2007 spin-offs of Covidien and TE Connectivity from Tyco, Tyco entered
into a Tax Sharing Agreement that governs the rights and obligations of each party with respect to
certain pre-2007 Separation income tax liabilities. More specifically, Tyco, Covidien and TE
Connectivity share 27%, 42% and 31%, respectively, of shared income tax liabilities that arise from
adjustments made by tax authorities to Tyco’s, Covidien’s and TE Connectivity’s U.S. and certain
non-U.S. income tax returns. Costs and expenses associated with the management of these shared tax
liabilities are generally shared equally among the parties. Consistent with the sharing provisions of the
Tax Sharing Agreement, Tyco had a net receivable from Covidien and TE Connectivity of $89 million
and $114 million as of September 30, 2011 and September 24, 2010, respectively. In addition, as of
September 30, 2011 and September 24, 2010, the Company had recorded $387 million and
$398 million, respectively, in other liabilities, and $49 million and $156 million, respectively, in accrued
and other current liabilities. During 2011, the Company made a net cash payment of $113 million to
Covidien and TE Connectivity related to the resolution of certain audit and pre-Separation tax matters.
Tyco and its subsidiaries’ income tax returns periodically are examined by various tax authorities.
In connection with these examinations, tax authorities, including the IRS, have raised issues and
proposed tax adjustments. The Company is reviewing and contesting certain of the proposed tax
adjustments. Amounts related to these tax adjustments and other tax contingencies and related interest
have been assessed as uncertain income tax positions and recorded as appropriate.
For a detailed discussion of contingencies related to Tyco’s income taxes, see Note 7 to the
Consolidated Financial Statements.
Compliance Matters
As previously reported in the Company’s periodic filings, the Company has received and responded
to various allegations and other information that certain improper payments were made by the
Company’s subsidiaries and agents in recent years. For example, two subsidiaries in the Company’s
Flow Control business in Italy have been charged, along with numerous other parties, in connection
with the Milan public prosecutor’s investigation into allegedly improper payments made to certain
Italian entities. During the fourth quarter of 2011, the Company’s subsidiaries were acquitted of these
charges. The Company reported to the DOJ and the SEC the investigative steps and remedial measures
that it has taken in response to these and other allegations and its internal investigations. In 2005, the
Company informed the DOJ and the SEC that it retained outside counsel to perform a Company-wide
baseline review of its policies, controls and practices with respect to compliance with the FCPA, and
that it would continue to investigate and make periodic progress reports to these agencies. The
Company has and will continue to communicate with the DOJ and SEC to provide updates on the
baseline review and follow-up investigations, including, as appropriate, briefings concerning additional
instances of potential improper conduct identified by the Company in the course of its ongoing
compliance activities. The baseline review, which has been completed, has revealed that some business
practices may not comply with Tyco and FCPA requirements, and in February 2010, the Company
initiated discussions with the DOJ and SEC aimed at resolving these matters, which remain ongoing.
Although the Company has recorded its best estimate of potential loss related to this matter, it is
2011 Financials 27