AT&T Wireless 2014 Annual Report Download - page 63

AT&T INC. | 61
Our valuation allowances at December 31, 2014 and 2013,
related primarily to state net operating losses and state
credit carryforwards.
We recognize the financial statement effects of a tax return
position when it is more likely than not, based on the
technical merits, that the position will ultimately be
sustained. For tax positions that meet this recognition
threshold, we apply our judgment, taking into account
applicable tax laws, our experience in managing tax audits
and relevant GAAP, to determine the amount of tax benefits
to recognize in our financial statements. For each position,
the difference between the benefit realized on our tax
return and the benefit reflected in our financial statements
is recorded on our consolidated balance sheets as an
unrecognized tax benefit (UTB). We update our UTBs at
each financial statement date to reflect the impacts of
audit settlements and other resolutions of audit issues,
the expiration of statutes of limitation, developments in
tax law and ongoing discussions with taxing authorities.
A reconciliation of the change in our UTB balance from
January 1 to December 31 for 2014 and 2013 is as follows:
Federal, State and Foreign Tax 2014 2013
Balance at beginning of year $ 4,227 $ 4,793
Increases for tax positions
related to the current year 470 255
Increases for tax positions
related to prior years 484 488
Decreases for tax positions
related to prior years (657) (1,238)
Lapse of statute of limitations (38) (24)
Settlements (21) (47)
Balance at end of year 4,465 4,227
Accrued interest and penalties 973 1,034
Gross unrecognized income tax benefits 5,438 5,261
Less: Deferred federal and state
income tax benefits (434) (481)
Less: Tax attributable to timing
items included above (2,400) (2,121)
Total UTB that, if recognized, would
impact the effective income tax
rate as of the end of the year $ 2,604 $ 2,659
Periodically we make deposits to taxing jurisdictions
which reduce our UTB balance but are not included in the
reconciliation above. The amount of deposits that reduced
our UTB balance was $2,258 at December 31, 2014, and
$2,303 at December 31, 2013.
Accrued interest and penalties included in UTBs were $973 as
of December 31, 2014, and $1,034 as of December 31, 2013.
We record interest and penalties related to federal, state and
foreign UTBs in income tax expense. The net interest and
penalty expense (benefit) included in income tax expense
was $(64) for 2014, $35 for 2013, and $(74) for 2012.
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, 2014 2013 2012
Interest rate swaps (Interest expense):
Gain (Loss) on interest rate swaps $(29) $(113) $(179)
Gain (Loss) on long-term debt 29 113 179
In addition, the net swap settlements that accrued and
settled in the periods above were offset against interest
expense.
Cash Flow Hedging Relationships
For the year ended December 31, 2014 2013 2012
Cross-currency swaps:
Gain (Loss) recognized in
accumulated OCI $ 528 $ 813 $ 432
Interest rate locks:
Gain (Loss) recognized in
accumulated OCI (128) — —
Interest income (expense) reclassified
from accumulated OCI into income (44) (46) (43)
Foreign exchange contracts:
Gain (Loss) recognized in
accumulated OCI — (2) 5
NOTE 11. INCOME TAXES
Significant components of our deferred tax liabilities
(assets) are as follows at December 31:
2014 2013
Depreciation and amortization $ 47,082 $43,623
Intangibles (nonamortizable) 1,874 1,874
Employee benefits (11,679) (9,072)
Net operating loss and other carryforwards (2,126) (2,272)
Other – net 69 29
Subtotal 35,220 34,182
Deferred tax assets valuation allowance 1,182 927
Net deferred tax liabilities $ 36,402 $35,109
Net long-term deferred tax liabilities $ 37,544 $36,308
Less: Net current deferred tax assets (1,142) (1,199)
Net deferred tax liabilities $ 36,402 $35,109
At December 31, 2014, we had combined net operating and
capital loss carryforwards (tax effected) for federal income
tax purposes of $222 and for state and foreign income tax
purposes of $959, expiring through 2033. Additionally, we
had state credit carryforwards of $945, expiring primarily
through 2033.
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.