Emerson 2006 Annual Report Download - page 36

158 under the New Accounting Pronouncements section below.
The Company contributed $124 million to dened benet plans
in 2006 and expects to contribute approximately $100 million to
$150 million in 2007. See Note 10.
           
Income tax expense and deferred tax assets and liabilities reect
management’s assessment of actual future taxes to be paid on
items reected in the nancial statements. Deferred tax assets
and liabilities are measured using enacted tax rates in effect
for the year in which the temporary differences between the
consolidated nancial statement carrying amounts of existing
assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the period that includes the
enactment date. No provision is made for U.S. income taxes on
the undistributed earnings of non-U.S. subsidiaries. These earn-
ings are permanently invested or otherwise indenitely retained
for continuing international operations. Determination of the
amount of taxes that might be paid on these undistributed earn-
ings if eventually remitted is not practicable. See Note 13.
The American Jobs Creation Act of 2004 (the Act) was signed
into law on October 22, 2004. The Act repeals an export tax
benet, provides for a 9 percent deduction on U.S. manufac-
turing income, and allows the repatriation of foreign earnings
at a reduced rate for one year, subject to certain limitations.
When fully phased-in, management estimates that the repeal
of the export tax benet will be offset by the deduction on
manufacturing income. During 2005, the Company repatriated
approximately $1.4 billion ($1.8 billion in total) of cash from
undistributed earnings of non-U.S. subsidiaries under the Act. As
a result, the Company recorded a tax expense of $63 million, or
$0.15 per share, in 2005.
                            
In June 2006, the Financial Accounting Standards Board issued
Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes – an Interpretation of FASB Statement 109” (FIN 48).
FIN 48 addresses the accounting for uncertain tax positions that
a company has taken or expects to take on a tax return. The
Company is in the process of analyzing the impact of FIN 48,
which is required to be adopted by the rst quarter of scal 2008.
FIN 48 is not expected to have a material impact on the
nancial statements.
In September 2006, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 157,
“Fair Value Measurements” (FAS 157). FAS 157 denes fair
value, establishes a formal framework for measuring fair value
and expands disclosures about fair value measurements. The
Company is in the process of analyzing the impact of FAS 157,
which is effective for scal years beginning after November 15, 2007.
In September 2006, the Financial Accounting Standards Board
issued FAS 158. FAS 158 requires employers to recognize the
over- or under-funded status of dened benet plans and other
postretirement plans in the statement of nancial position and to
recognize changes in the funded status in the year in which the
changes occur through comprehensive income. In addition,
FAS 158 requires employers to measure the funded status of
plans as of the date of the year-end statement of nancial posi-
tion. The recognition and disclosure provisions of FAS 158 are
effective for scal years ending after December 15, 2006, while
the requirement to measure plan assets and benet obliga-
tions as of a company’s year-end date is effective for scal years
ending after December 15, 2008. The Company is currently in
the process of analyzing the impact of FAS 158; however, see
the previous discussion under Critical Accounting Policies for
the potential impact on the Company’s nancial statements
upon adoption.
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Financial Review
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