Capital One 2011 Annual Report Download - page 244

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED STATEMENTS—(Continued)
December 31,
(Dollars in millions) 2011 2010
Original Issue discount:
OID—late fees ................................................................ $ 487 $ 387
OID—all other ................................................................ 1,169 1,192
Gross original issue discount .................................................... 1,656 1,579
Net deferred tax liability ........................................................ $ 596 $ 574
The accounting guidance for income taxes clarifies the accounting for uncertainty in income taxes, and prescribes
a recognition threshold and measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. The guidance also provides rules on derecognition,
classification, interest and penalties, accounting in interim periods, disclosure, and transition.
We recognize accrued interest and penalties related to income taxes as a component of income tax expense.
During 2011, 2010 and 2009, $(39) million, $(62) million and $(7) million, respectively, of net interest and
penalties was included in income tax expense. The accrued balance of interest and penalties related to
unrecognized tax benefits is presented in the table below.
A reconciliation of the change in unrecognized tax benefits from January 1, 2010 to December 31, 2011 is as
follows:
(Dollars in millions)
Gross
Unrecognized
Tax Benefits
Accrued
Interest
and
Penalties
Gross Tax,
Interest
and
Penalties
Balance at January 1, 2010 ....................................... $359 $100 $ 459
Additions for tax positions related to the current year .................. 0 0 0
Additions for tax positions related to prior years ...................... 0 8 8
Reductions for tax positions related to prior years due to IRS and other
settlements .................................................. (72) (43) (115)
Additions for tax positions related to acquired entities in prior years, offset
to goodwill .................................................. 0 0 0
Other reductions for tax positions related to prior years ................. (2) 0 (2)
Balance at December 31, 2010 .................................... $285 $ 65 $350
Additions for tax positions related to the current year .................. 0 00
Additions for tax positions related to prior years ...................... 61 26 87
Reductions for tax positions related to prior years due to IRS and other
settlements .................................................. (133) (31) (164)
Additions for tax positions related to acquired entities in prior years, offset
to goodwill .................................................. 0 00
Other reductions for tax positions related to prior years ................. 0 00
Balance at December 31, 2011 .................................... $ 213 $ 60 $ 273
Portion of balance at December 31, 2011 that, if recognized, would impact
the effective income tax rate .................................... $ 123 $ 40 $ 163
We are subject to examination by the IRS and other tax authorities in certain countries and states in which we
have significant business operations. The tax years subject to examination vary by jurisdiction. The IRS
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