AT&T Wireless 2011 Annual Report Download - page 77

AT&T Inc. 75
NOTE 10. INCOME TAXES
Significant components of our deferred tax liabilities (assets)
are as follows at December 31:
2011 2010
Depreciation and amortization $ 39,367 $ 34,172
Intangibles (nonamortizable) 1,897 1,958
Employee benefits (14,950) (13,612)
Net operating loss and other carryforwards (1,502) (1,552)
Other – net (1,451) (1,015)
Subtotal 23,361 19,951
Deferred tax assets valuation allowance 917 949
Net deferred tax liabilities $ 24,278 $ 20,900
Net long-term deferred tax liabilities $ 25,748 $ 22,070
Less: Net current deferred tax assets (1,470) (1,170)
Net deferred tax liabilities $ 24,278 $ 20,900
In March 2010, comprehensive healthcare reform legislation,
which included a change in the tax treatment related to
Medicare Part D subsidies, was enacted. We recorded a $995
charge to income tax expense in our consolidated statement
of income during the first quarter of 2010 and increased our
deferred income taxes liability balance to reflect the impact
of this change.
In September 2010, we reached a settlement with the Internal
Revenue Service (IRS) on tax basis calculations related to a
2008 restructuring of our wireless operations. The IRS
settlement resolved the uncertainty regarding the amount and
timing of amortization deductions related to certain of our
wireless assets. We recorded an $8,300 reduction to income
tax expense in our consolidated statement of income during
the third quarter of 2010 and corresponding decreases of
$6,760 to our net noncurrent deferred income tax liabilities
and $1,540 to other net tax liabilities to reflect the tax
benefits of the settlement. The IRS settlement resulted in a
reduction to our unrecognized tax benefits (UTBs) for tax
positions related to prior years of $1,057, which also reduced
the total amount of UTBs that, if recognized, would impact
the effective tax rate.
At December 31, 2011, we had combined net operating and
capital loss carryforwards (tax effected) for federal income
tax purposes of $114 and for state and foreign income tax
purposes of $917, expiring through 2030. Additionally, we
had federal credit carryforwards of $73 and state credit
carryforwards of $398, expiring primarily through 2028.
We recognize a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some
portion, or all, of a deferred tax asset will not be realized.
Our valuation allowances at December 31, 2011 and 2010,
relate primarily to state net operating loss carryforwards.
Collateral and Credit-Risk Contingency We have entered into
agreements with our derivative counterparties establishing
collateral thresholds based on respective credit ratings and
netting agreements. At December 31, 2011, we had posted
collateral of $98 (a deposit asset) and had no held collateral
(a receipt liability). Under the agreements, if our credit rating
had been downgraded one rating level by Moody’s Investors
Service and Fitch, Inc. before the final collateral exchange in
December, we would have been required to post additional
collateral of $161. At December 31, 2010, we had posted
collateral of $82 and held collateral of $26. We do not offset
the fair value of collateral, whether the right to reclaim cash
collateral (a receivable) or the obligation to return cash
collateral (a payable), against the fair value of the derivative
instruments.
Following is the notional amount of our outstanding derivative
positions at December 31:
2011 2010
Interest rate swaps $ 8,800 $11,050
Cross-currency swaps 7,502 7,502
Interest rate locks 800 3,400
Foreign exchange contracts 207 221
Total $17,309 $22,173
Following is the related hedged items affecting our financial
position and performance:
Effect of Derivatives on the
Consolidated Statements of Income
Fair Value Hedging Relationships
For the years ended December 31, 2011 2010 2009
Interest rate swaps (Interest expense):
Gain (Loss) on interest rate swaps $ 10 $ 125 $(216)
Gain (Loss) on long-term debt (10) (125) 216
In addition, the net swap settlements that accrued and settled
in the year ended December 31 were also reported as
reductions of interest expense.
Cash Flow Hedging Relationships
For the year ended December 31, 2011 2010 2009
Cross-currency swaps:
Gain (Loss) recognized in
accumulated OCI $(219) $(201) $738
Interest rate locks:
Gain (Loss) recognized
in accumulated OCI (167) (320) 203
Interest income (expense) reclassified
from accumulated OCI into income (23) (19) (23)
Foreign exchange contracts:
Gain (Loss) recognized in
accumulated OCI (10) 5 (2)
The balance of the unrealized derivative gain (loss) in
accumulated OCI was $(421) at December 31, 2011, $(180)
at December 31, 2010, and $142 at December 31, 2009.