Cardinal Health 2011 Annual Report Download - page 87

to certain federal, state and international loss carryforwards that, in our opinion, are more likely than not t
o
exp
i
re unut
ili
ze
d
. However, to t
h
e extent t
h
at tax
b
ene
fi
ts re
l
ate
d
to t
h
ese carry
f
orwar
d
s are rea
li
ze
di
nt
h
e
f
uture,
the reduction in the valuation allowance would reduce income tax ex
p
ense.
We had
$
746.8 million,
$
730.6 million and
$
848.8 million of unrecognized tax benefits at June 30, 2011
,
2010 and 2009, respectivel
y
. The June 30, 2011, 2010 and 2009 balances include $332.4 million, $311.3 millio
n
a
nd
$
610.9 million, respectively, of unrecognized tax benefits that, if recognized, would have an impact on the
e
ff
ect
i
ve tax rate. T
h
e rema
i
n
i
ng unrecogn
i
ze
d
tax
b
ene
fi
ts re
l
ate to tax pos
i
t
i
ons
f
or w
hi
c
h
u
l
t
i
mate
d
e
d
uct
ibili
t
y
is hi
g
hl
y
certain but for which there is uncertaint
y
as to the timin
g
of such deductibilit
y
. Reco
g
nition of these tax
benefits would not affect our effective tax rate. We include the full amount of unrecognized tax benefits i
n
d
e
f
erre
di
ncome taxes an
d
ot
h
er
li
a
bili
t
i
es
i
nt
h
e conso
lid
ate
db
a
l
ance s
h
eets. A reconc
ili
at
i
on o
f
t
h
e
b
eg
i
nn
i
ng
a
nd endin
g
amounts of unreco
g
nized tax benefits for fiscal 2011, 2010 and 2009 is as follows:
J
une
30,
(
in millions
)
20
11 2
0
1
0
2
009
B
alance at beginning of fiscal year
.
...................
.
$
730.6
$
848.8
$
762.
9
Addi
t
i
ons
f
or tax pos
i
t
i
ons o
f
t
h
e current year
............
15.
9
43.1 64.5
A
dditions for tax positions of prior
y
ear
s
................
5
8.3
9
0.0 118.
7
R
eductions for tax positions of prior year
s
..............
.
(
20.1
)(
240.0
)(5
4.3
)
S
ett
l
ements
wi
t
h
tax aut
h
or
i
t
i
es
.......................
(
35.8
)(
10.7
)(
37.8
)
Ex
p
iration of the statute of limitations
..................
(2.1) (0.6) (
5
.2
)
B
a
l
ance at en
d
o
ffi
sca
ly
ea
r
..........................
$
746.8
$
730.6
$
848.8
We reco
g
nize accrued interest and penalties related to unreco
g
nized tax benefits in income tax expense. A
s
o
f June 30, 2011, 2010 and 2009, we had
$
267.2 million,
$
233.0 million and
$
246.8 million, respectively
,
a
ccrue
df
or t
h
epa
y
ment o
fi
nterest an
d
pena
l
t
i
es. T
h
ese
b
a
l
ances are
g
ross amounts
b
e
f
ore an
y
tax
b
ene
fi
ts an
d
a
re included in deferred income taxes and other liabilities in the consolidated balance sheet. For the
y
ear ended
J
une 30, 2011, we recognized
$
36.0 million of interest and penalties in income tax expense.
We file income tax returns in the U.S. federal
j
urisdiction, various U.S. state
j
urisdictions and variou
s
f
ore
i
gn
j
ur
i
s
di
ct
i
ons. W
i
t
hf
ew except
i
ons, we are su
bj
ect to au
di
t
b
y tax
i
ng aut
h
or
i
t
i
es
f
or
fi
sca
l
2001 t
h
roug
h
t
h
e current
fi
sca
ly
ear.
Th
e Interna
l
Revenue Serv
i
ce (“IRS”)
i
s current
l
y con
d
uct
i
ng au
di
ts o
ffi
sca
l
years 2001 t
h
roug
h
2010. We
h
ave rece
i
ve
d
propose
d
a
dj
ustments
f
rom t
h
e IRS
f
or
fi
sca
l
years 2003 t
h
roug
h
2007 re
l
ate
d
to our trans
f
e
r
pricin
g
arran
g
ements between forei
g
n and domestic subsidiaries and the transfer of intellectual propert
y
amon
g
subsidiaries of an acquired entity prior to its acquisition by us. The IRS proposed additional taxes of
$
849.
0
m
illi
on, exc
l
u
di
ng pena
l
t
i
es an
di
nterest. I
f
t
hi
s tax u
l
t
i
mate
l
y must
b
epa
id
, CareFus
i
on
i
s
li
a
bl
eun
d
er t
h
e tax
matters a
g
reement for $591.5 million of the total amount. We disa
g
ree with these proposed ad
j
ustments and ar
e
vi
gorous
l
y contest
i
ng t
h
em. We
b
e
li
eve we are a
d
equate
l
y reserve
df
or t
h
e uncerta
i
n tax pos
i
t
i
ons re
l
ate
d
to
t
h
ese matters
.
I
t
i
s reasona
bl
y poss
ibl
et
h
at t
h
ere cou
ld b
eac
h
ange
i
nt
h
e amount o
f
unrecogn
i
ze
d
tax
b
ene
fi
ts w
i
t
hi
nt
h
e
next 12 mont
h
s
d
ue to act
i
v
i
t
i
es o
f
t
h
e IRS or ot
h
er tax
i
n
g
aut
h
or
i
t
i
es,
i
nc
l
u
di
n
g
propose
d
assessments o
f
a
dditional tax,
p
ossible settlement of audit issues, or the ex
p
iration of a
pp
licable statutes of limitations. W
e
est
i
mate t
h
at t
h
e range o
f
t
h
e poss
ibl
ec
h
ange
i
n unrecogn
i
ze
d
tax
b
ene
fi
ts w
i
t
hi
nt
h
e next 12 mont
h
s
i
sa
d
ecrease of approximatel
y
zero to $215.0 million, exclusive of penalties and interest.
61