ADT 2012 Annual Report Download - page 172

The reconciliation between the actual effective tax rate on continuing operations and the statutory U.S.
federal income tax rate of 35% for the years ended September 28, 2012, September 30, 2011 and September 24,
2010 is as follows:
2012 2011 2010
Federal statutory tax rate ................................... 35.0% 35.0% 35.0%
Increases (reductions) in taxes due to:
U.S. state income tax provision, net ........................... 3.4% 3.5% 5.9%
Non-U.S. net earnings ..................................... (0.6)% (0.7)% (1.9)%
Nondeductible charges ..................................... — % 0.2% 0.7%
Other ................................................... (0.3)% (0.3)% 0.2%
Provision for income taxes .................................. 37.5% 37.7% 39.9%
Deferred income taxes result from temporary differences between the amount of assets and liabilities
recognized for financial reporting and tax purposes. For purposes of the Company’s Consolidated and Combined
Balance Sheets for periods prior to the Separation, deferred tax balances and tax carryforwards and credits have
been recorded under the Separate Return Method. The deferred tax balances reflected in the Company’s
Consolidated and Combined Balance Sheet as of September 28, 2012 have been recorded on a consolidated
return basis and include tax attributes allocated to the Company at the time of the Separation. The inclusion of
these tax attributes resulted in tax carryforwards and credits, which generated higher deferred income tax assets
for the Company as of September 28, 2012.
The components of the Company’s net deferred income tax liability as of September 28, 2012 and
September 30, 2011 are as follows ($ in millions):
September 28,
2012
September 30,
2011
Deferred tax assets:
Accrued liabilities and reserves ................ $ 32 $ 36
Tax loss and credit carryforwards .............. 512 1
Postretirement benefits ....................... 22 20
Deferred revenue ........................... 147 156
Other ..................................... 11 65
$ 724 $ 278
Deferred tax liabilities:
Property and equipment ...................... (9) (21)
Subscriber system assets ..................... (530) (443)
Intangible assets ............................ (299) (397)
Other ..................................... (1) (18)
$(839) $(879)
Net deferred tax liability before valuation
allowance ............................... (115) (601)
Valuation allowance ......................... (2) (1)
Net deferred tax liability ..................... $(117) $(602)
The valuation allowance for deferred tax assets of $2 million and $1 million as of September 28, 2012 and
September 30, 2011, respectively, relates to the uncertainty of the utilization of certain state and non U.S.
deferred tax assets. The Company believes that it is more likely than not that it will generate sufficient future
taxable income to realize the tax benefits related to its deferred tax assets, including credit and net operating loss
carryforwards, on the Company’s Consolidated and Combined Balance Sheet.
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