Alcoa 2013 Annual Report Download - page 156

The following table details the expiration periods of the deferred tax assets presented above:
December 31, 2013
Expires
within
10 years
Expires
within
11-20 years
No
expiration* Other* Total
Tax loss carryforwards $ 377 $ 898 $ 954 $ - $ 2,229
Tax credit carryforwards 417 75 75 - 567
Other - - 498 3,094 3,592
Valuation allowance (412) (843) (268) (281) (1,804)
$ 382 $ 130 $1,259 $2,813 $ 4,584
* Deferred tax assets with no expiration may still have annual limitations on utilization. Other represents deferred tax
assets whose expiration is dependent upon the reversal of the underlying temporary difference. A substantial amount
of Other relates to employee benefits that will become deductible for tax purposes over an extended period of time as
contributions are made to employee benefit plans and payments are made to retirees.
The total deferred tax asset (net of valuation allowance) is supported by taxable temporary differences that reverse
within the carryforward period (approximately 30%), tax planning strategies (approximately 5%), and projections of
future taxable income exclusive of reversing temporary differences (approximately 65%).
Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not (greater than 50%) that
a tax benefit will not be realized. In evaluating the need for a valuation allowance, management considers all potential
sources of taxable income, including income available in carryback periods, future reversals of taxable temporary
differences, projections of taxable income, and income from tax planning strategies, as well as all available positive
and negative evidence. Positive evidence includes factors such as a history of profitable operations, projections of
future profitability within the carryforward period, including from tax planning strategies, and Alcoa’s experience with
similar operations. Existing favorable contracts and the ability to sell products into established markets are additional
positive evidence. Negative evidence includes items such as cumulative losses, projections of future losses, or
carryforward periods that are not long enough to allow for the utilization of a deferred tax asset based on existing
projections of income. In certain jurisdictions, deferred tax assets related to cumulative losses exist without a valuation
allowance where in management’s judgment the weight of the positive evidence more than offsets the negative
evidence of the cumulative losses. Upon changes in facts and circumstances, management may conclude that deferred
tax assets for which no valuation allowance is currently recorded may not be realized, resulting in a future charge to
establish a valuation allowance. Existing valuation allowances are re-examined under the same standards of positive
and negative evidence. If it is determined that it is more likely than not that a deferred tax asset will be realized, the
appropriate amount of the valuation allowance, if any, is released. Deferred tax assets and liabilities are also re-
measured to reflect changes in underlying tax rates due to law changes and the granting and lapse of tax holidays.
In 2013, Alcoa recognized a $372 discrete income tax charge for valuation allowances on certain deferred tax assets in
Spain and the U.S. Of this amount, a $237 valuation allowance was established on the full value of the deferred tax
assets related to a Spanish consolidated tax group. As of December 31, 2013, these deferred tax assets have an
expiration period ranging from 2014 to 2030. After weighing all available positive and negative evidence, as described
above, management determined that it was no longer more likely than not that Alcoa will realize the tax benefit of
these deferred tax assets. This was mainly driven by a decline in the outlook of the Primary Metals business (2013
realized prices were the lowest since 2009) combined with prior year cumulative losses of the Spanish consolidated tax
group. The need for this valuation allowance will be assessed on a continuous basis in future periods and, as a result, a
portion or all of the allowance may be reversed based on changes in facts and circumstances.
The remaining $135 relates to a valuation allowance established on a portion of available foreign tax credits in the U.S.
These credits can be carried forward for 10 years, and, as of December 31, 2013, have an expiration period ranging
from 2016 to 2023. After weighing all available positive and negative evidence, as described above, management
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