Avon 2007 Annual Report Download - page 66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Payments for the purchases, proceeds and gross realized gains
and losses from the sales of these securities totaled $26.2,
$26.1, $.1 and $(.1), respectively, during 2006.
For the years ended December 31, 2007 and 2006, unrealized
gains on available-for-sale securities impacted accumulated other
comprehensive loss as follows:
2007 2006
Net unrealized gains at beginning of year,
net of taxes $.3 $.2
Net unrealized gains, net of taxes .1 .1
Reclassification of net gains to earnings,
net of taxes – –
Net unrealized gains end of year, net of
taxes $.4 $.3
NOTE 6. Income Taxes
Deferred tax assets (liabilities) resulting from temporary differ-
ences in the recognition of income and expense for tax and
financial reporting purposes at December 31 consisted of the
following:
2007 2006
Deferred tax assets:
Postretirement benefits $ 43.0 $ 73.2
Accrued expenses and reserves 176.7 145.4
Special and non-recurring charges 48.8 23.7
Employee benefit plans 197.3 136.1
Foreign operating loss carryforwards 295.8 252.6
Postemployment benefits 16.1 16.1
Capitalized expenses 18.8 34.7
Minimum tax credit carryforwards 24.9 19.2
Foreign tax credit carryforwards 28.6 –
All other 65.2 42.1
Valuation allowance (278.3) (234.1)
Total deferred tax assets 636.9 509.0
Deferred tax liabilities:
Depreciation and amortization (53.9) (54.6)
Prepaid retirement plan costs (37.4) (10.9)
Capitalized interest (2.1) (4.8)
Capitalized software (6.8) (5.5)
Unremitted foreign earnings (20.1) (8.6)
All other (21.9) (29.0)
Total deferred tax liabilities (142.2) (113.4)
Net deferred tax assets $ 494.7 $ 395.6
Deferred tax assets (liabilities) at December 31 were classified as
follows:
2007 2006
Deferred tax assets:
Prepaid expenses and other $261.4 $191.7
Other assets 272.9 241.4
Total deferred tax assets 534.3 433.1
Deferred tax liabilities:
Income taxes (7.7) (7.4)
Long-term income taxes (31.9) (30.1)
Total deferred tax liabilities (39.6) (37.5)
Net deferred tax assets $494.7 $395.6
The valuation allowance primarily represents amounts for foreign
operating loss carryforwards. The basis used for recognition of
deferred tax assets included the profitability of the operations,
related deferred tax liabilities and the likelihood of utilizing tax
credit carryforwards during the carryover periods. The net
increase in the valuation allowance of $44.2 during 2007 was
mainly due to several of our foreign entities continuing to incur
losses during 2007, thereby increasing the net operating loss
carryforwards for which a valuation allowance was provided.
Income before taxes and minority interest for the years ended
December 31 was as follows:
2007 2006 2005
United States $ (31.6) $ (33.5) $ 206.0
Foreign 827.7 737.0 918.2
Total $796.1 $703.5 $1,124.2
The provision for income taxes for the years ended December 31
was as follows:
2007 2006 2005
Federal:
Current $ 23.2 $ (16.7) $ (29.8)
Deferred (37.2) (38.6) (7.2)
(14.0) (55.3) (37.0)
Foreign:
Current 348.2 348.4 319.8
Deferred (75.8) (67.0) (20.0)
272.4 281.4 299.8
State and other:
Current 3.8 2.4 11.4
Deferred .6 (5.1) (4.5)
4.4 (2.7) 6.9
Total $262.8 $223.4 $269.7