Archer Daniels Midland 2009 Annual Report Download - page 72

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66
Archer Daniels Midland Company
Notes to Consolidated Financial Statements (Continued)
Note 12.
Income Taxes (Continued)
The Company adopted the provisions of FIN 48 effective July 1, 2007. FIN 48 clarifies the accounting for income
tax positions by prescribing a minimum threshold a tax position is required to meet before being recognized in the
consolidated financial statements. This interpretation requires the Company to recognize in the consolidated
financial statements tax positions determined more likely than not to be sustained upon examination, based on the
technical merits of the position. Upon adoption of FIN 48, no material changes were required to be taken into
account in the income statement or balance sheet of the Company. The total amounts of unrecognized tax benefits
at June 30, 2008 and 2009 are as follows:
Unrecognized Tax Benefits
2009
2008
(in millions)
Beginning balance
$ 55
$ 21
Additions related to current years’ tax positions
–
29
Additions related to prior years’ tax positions
10
7
Reductions related to prior years’ tax positions
(9)
–
Settlements with tax authorities
(2)
(2)
Ending balance
$ 54
$ 55
The additions and reductions in unrecognized tax benefits shown in the table include effects related to net income
and shareholders’ equity, and timing differences for which the ultimate deductibility is highly certain but for which
there is uncertainty about the timing of such deductibility. The 2009 changes in unrecognized tax benefits did not
have a material effect on the Company’s net income or cash flow.
The Company is subject to income taxation in many jurisdictions around the world. Resolution of the related tax
positions through negotiations with relevant tax authorities or through litigation may take years to complete.
Therefore, it is difficult to predict the timing for resolution of tax positions. However, the Company does not
anticipate that the total amount of unrecognized tax benefits will increase or decrease significantly in the next
twelve months. Given the long periods of time involved in resolving tax positions, the Company does not expect
that the recognition of unrecognized tax benefits will have a material impact on the Company’s effective income
tax rate in any given period. If the total amount of unrecognized tax benefits were required to be recognized by
the Company at one time, there would be a positive impact of $33 million on the tax expense for that period.
The Company classifies interest on income tax related balances as interest expense or interest income and
classifies tax-related penalties as selling, general and administrative expenses. At June 30, 2009 and 2008, the
Company had accrued interest and penalties on unrecognized tax benefits of $22 million and $17.5 million,
respectively.