Baker Hughes 2014 Annual Report Download - page 91

Baker Hughes Incorporated
Notes to Consolidated Financial Statements
66
The tax effects of our temporary differences and carryforwards are as follows at December 31:
2014 2013
Deferred tax assets:
Receivables $ 65 $ 68
Inventory 376 347
Employee benefits 106 98
Other accrued expenses 173 185
Operating loss carryforwards 493 403
Tax credit carryforwards 481 462
Other 104 70
Subtotal 1,798 1,633
Valuation allowances (1,051) (949)
Total 747 684
Deferred tax liabilities:
Goodwill and other intangibles 334 356
Property 459 459
Undistributed earnings of foreign subsidiaries 26 14
Other 16 24
Total 835 853
Net deferred tax liability $ (88) $ (169)
We record a valuation allowance when it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of the deferred tax assets depends on the ability to generate
sufficient taxable income of the appropriate character in the future and in the appropriate taxing jurisdictions. At
December 31, 2014, valuation allowances totaled $1,051 million consisting of $465 million for operating loss
carryforwards, $471 million for foreign tax credit carryforwards, and $115 million for other deferred tax assets in
various jurisdictions. There are $28 million of operating loss carryforwards without a valuation allowance, the
majority of which expire in varying amounts over the next twenty years.
We have provided relevant U.S. and foreign taxes for the anticipated repatriation of certain earnings of our
foreign subsidiaries. We consider the undistributed earnings of our foreign subsidiaries above the amount for which
taxes have already been provided to be indefinitely reinvested, as we have no current intention to repatriate these
earnings. As of December 31, 2014, the cumulative amount of earnings upon which the U.S. income taxes have
not been provided is approximately $6.1 billion. These additional foreign earnings could become subject to
additional tax, if remitted, or deemed remitted, as a dividend. Computation of the potential deferred tax liability
associated with these undistributed earnings and any other basis differences, is not practicable.
At December 31, 2014, we had approximately $134 million of foreign tax credits which may be carried forward
indefinitely under applicable foreign law, and $347 million of foreign tax credits which expire in 2015 through 2024
under U.S. tax law.
At December 31, 2014, we had $291 million of tax liabilities for total gross unrecognized tax benefits related to
uncertain tax positions, which includes liabilities for interest and penalties of $36 million and $13 million,
respectively. If we were to prevail on all uncertain tax positions, the net effect would be a decrease to our income
tax provision of approximately $273 million. The remaining approximately $18 million is offset by deferred tax
assets that represent tax benefits that would be received in different taxing jurisdictions in the event that we did not
prevail on all uncertain tax positions.