AbbVie 2012 Annual Report Download - page 97

At December 31, 2012, U.S. income taxes have not been provided on approximately $19.4 billion of
undistributed foreign earnings as these earnings have been indefinitely reinvested for continued use in
foreign operations. It is not practicable to determine the amount of deferred income taxes not provided
on these earnings.
Deferred Tax Assets and Liabilities
as of December 31 (in millions) 2012 2011
Deferred tax assets
Compensation and employee benefits $ 295 $ 290
Trade receivable reserves 412 371
Inventory reserves 42 49
Deferred intercompany profit 777 592
State income taxes 106 125
Other 1,039 1,196
Total deferred tax assets $2,671 $2,623
Deferred tax liabilities
Depreciation — (20)
Other, primarily the excess of book basis over tax basis of intangible assets (857) (983)
Total deferred tax liabilities (857) (1,003)
Net deferred tax asset $1,814 $1,620
Unrecognized Tax Benefits
years ended December 31 (in millions) 2012 2011 2010
January 1 $1,039 $1,645 $1,319
Increase due to current year tax positions 370 294 346
Increase due to prior year tax positions 1 149 110
Decrease due to current year tax positions — (15) —
Decrease due to prior year tax positions (220) (604) (48)
Settlements (50) (430) (82)
December 31 $1,140 $1,039 $1,645
AbbVie and Abbott entered into a tax sharing agreement effective on the date of separation. For tax
contingencies prior to the separation, Abbott will indemnify and hold AbbVie harmless if the tax
positions are settled for amounts in excess of recorded liabilities, and AbbVie will not benefit if prior
tax positions are resolved more favorably than recorded amounts. As a result, no liability for uncertain
tax positions was recorded in the combined financial statements as of December 31, 2012, 2011 and
2010.
Note 12 Litigation
There are a number of patent disputes with third parties who claim AbbVie’s products infringe their
patents. On February 21, 2012, the U.S. Supreme Court denied Centocor Inc.’s and New York
University’s petition to review a February 2011 Federal Circuit Court of Appeals decision reversing a
$1.67 billion judgment in favor of Centocor and New York University on a patent they claimed
AbbVie’s HUMIRA infringed. This decision concludes the case.
The U.S. Department of Justice, through the U.S. Attorney for the Western District of Virginia, and
various state Attorneys General investigated AbbVie’s sales and marketing activities for Depakote. The
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