Avon 2013 Annual Report Download - page 92

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Foreign exchange net gains of $.2 and $7.7 for 2013 and 2012, respectively, resulting from the translation of actuarial losses and prior
service cost recorded in AOCI are included in changes in foreign currency translation adjustments in the Consolidated Statements of
Comprehensive Income.
NOTE 7. Income Taxes
At December 31, 2013, we had recognized deferred tax assets relating to tax loss carryforwards of $756.1 primarily from foreign
jurisdictions, for which a valuation allowance of $717.6 has been provided. We also had recognized deferred tax assets of $585.4 relating to
excess foreign tax credit carryforwards that will expire in the 2018-2023 period. We have concluded that the deferred tax assets associated
with the excess foreign tax credits are “more likely than not” to be realized prior to expiration.
During the fourth quarter of 2012, as a result of the uncertainty of our financing arrangements and our domestic liquidity profile at that
time, we determined that we may repatriate offshore cash to meet certain domestic funding needs. Accordingly, we asserted that these
undistributed earnings of foreign subsidiaries were no longer indefinitely reinvested and, therefore, recorded an additional provision for
income taxes of $168.3 on such earnings. At December 31, 2012, we had a deferred tax liability in the amount of $224.8 for the U.S. tax
cost on the undistributed earnings of subsidiaries outside of the U.S. of $3.1 billion.
At December 31, 2013, we continue to assert that our foreign earnings are not indefinitely reinvested, as a result of our domestic liquidity
profile. Accordingly, we adjusted our deferred tax liability to account for our 2013 undistributed earnings of foreign subsidiaries and for
earnings that were actually repatriated to the U.S. during the year. Additionally, the deferred tax liability was reduced due to the lower cost
to repatriate the undistributed earnings of our foreign subsidiaries compared to 2012. The net impact on the deferred tax liability associated
with the Company’s undistributed earnings is a reduction of $81.9, resulting in a deferred tax liability balance of $142.8 related to the
incremental U.S. tax cost on $2.6 billion of undistributed foreign earnings at December 31, 2013. This deferred income tax liability amount is
net of the estimated foreign tax credits that would be generated upon the repatriation of such earnings. The repatriation of foreign earnings
should result in the utilization of foreign tax credits in the year of repatriation; therefore, the utilization of foreign tax credits is dependent on
the amount and timing of repatriations, as well as the jurisdictions involved. We have not included the undistributed earnings of our
subsidiary in Venezuela in the calculation of this deferred income tax liability as local regulations restrict cash distributions denominated in
U.S. dollars.