Alcoa 2010 Annual Report Download - page 139

A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties)
was as follows:
December 31, 2010 2009 2008
Balance at beginning of year $ 48 $24 $ 33
Additions for tax positions of the current year - 1 -
Additions for tax positions of prior years 30 24 11
Reductions for tax positions of prior years (5) - (10)
Settlements with tax authorities (22) (5) (7)
Expiration of the statute of limitations (5) - -
Foreign currency translation - 4 (3)
Balance at end of year $ 46 $48 $ 24
For all periods presented, a portion of the balance at end of year pertains to state tax liabilities, which are presented
before any offset for federal tax benefits. The effect of unrecognized tax benefits, if recorded, that would impact the
annual effective tax rate for 2010, 2009, and 2008 would be approximately 4%, 1%, and 2%, respectively, of pretax
book income. Alcoa does not anticipate that changes in its unrecognized tax benefits will have a material impact on the
Statement of Consolidated Operations during 2011.
It is Alcoa’s policy to recognize interest and penalties related to income taxes as a component of the Provision for
income taxes on the accompanying Statement of Consolidated Operations. In 2010, 2009, and 2008, Alcoa recognized
$1, $6, and $4, respectively, in interest and penalties. Due to the expiration of the statute of limitations and settlements
with tax authorities, Alcoa also recognized income of $4, $1, and $3 in 2010, 2009, and 2008, respectively, related to
previously accrued interest and penalties. As of December 31, 2010 and 2009, the amount accrued for the payment of
interest and penalties was $13 and $16, respectively.
U. Accounts Receivables
Alcoa had a program to sell a senior undivided interest in certain customer receivables, without recourse, on a
continuous basis to a third-party for cash (up to $250). This program was renewed on October 29, 2009 and was due to
expire on October 28, 2010. On March 26, 2010, Alcoa terminated this program and repaid the $250 originally
received in 2009. In light of the adoption of accounting changes related to the transfer of financial assets, had the
securitization program not been terminated, it would have resulted in a $250 increase in both Receivables from
customers and Short-term borrowings on the accompanying Consolidated Balance Sheet (see the Recently Adopted
Accounting Guidance section of Note A). As of December 31, 2009, Alcoa derecognized $250 in Receivables from
customers on the accompanying Consolidated Balance Sheet under this program. Alcoa serviced the customer
receivables for the third-party at market rates; therefore, no servicing asset or liability was recorded.
Also on March 26, 2010, Alcoa entered into two arrangements with third parties to sell certain customer receivables
outright without recourse. In December 2010, Alcoa sold $192 in customer receivables under these arrangements. As
of December 31, 2010, $150 of the sold receivables remain uncollected. Alcoa is servicing the customer receivables for
the third parties at market rates; therefore, no servicing asset or liability was recorded.
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