Emerson 2008 Annual Report Download - page 53

[ 46 ] Emerson 2008
At September 30, 2008 and 2007, respectively, net current deferred tax assets were $328 and $269, and net
noncurrent deferred tax liabilities were $434 and $434. Total income taxes paid were approximately $1,110, $960 and
$820 in 2008, 2007 and 2006, respectively. The capital loss carryforward of $18 expires in 2012. The majority of the
$249 net operating losses and tax credits can be carried forward indenitely, while the remainders expire over varying
periods. The valuation allowance for deferred tax assets at September 30, 2008, includes $50 related to acquisitions,
which would reduce goodwill if the deferred tax assets are ultimately realized.
Effective October 1, 2007, the Company adopted the recognition and disclosure provisions of Financial Accounting
Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB State-
ment 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. As of October 1, 2007, the Company had total unrecognized tax benets of $149 before recover-
ability of cross-jurisdictional tax credits (U.S., state and non-U.S.) and temporary differences, and including amounts
related to acquisitions that would reduce goodwill. If none of these liabilities is ultimately paid, the tax provision and
tax rate would be favorably impacted by $90. As a result of adoption, the Company recorded a charge of $6 to beginning
retained earnings. The amount of unrecognized tax benets is not expected to signicantly increase or decrease within
the next 12 months. A reconciliation of the beginning and ending amount of unrecognized tax benets is as follows:
Balance at October 1, 2007 $149
Additions for current year tax positions 33
Additions for prior years tax positions 27
Reductions for prior years tax positions (26)
Reductions for settlements with tax authorities (9)
Reductions for expirations of statute of limitations (6)
 $168
If none of the $168 is ultimately paid, the tax provision and tax rate would be favorably impacted by $97. The Company
accrues interest and penalties related to income taxes in income tax expense. Total interest and penalties recognized
was $7 in 2008. As of September 30, 2008 and October 1, 2007, total accrued interest and penalties were $27 and $24,
respectively.
The major jurisdiction for which the Company les income tax returns is the United States. U.S. federal examinations by
the Internal Revenue Service are substantially complete through 2005. The status of non-U.S. and state tax examina-
tions varies by the numerous legal entities and jurisdictions in which the Company operates.

The Company’s stock-based compensation plans include stock options and incentive shares.

The Company’s Stock Option Plans permit key ofcers and employees to purchase common stock at specied prices.
Options are granted at 100 percent of the average of the high and low prices of the Company’s common stock on the
date of grant, generally vest one-third each year and expire ten years from the date of grant. Compensation cost is
recognized over the vesting period based on the number of options expected to vest. At September 30, 2008,
approximately 11.4 million options remained available for grant under these plans.
Changes in shares subject to option during the year ended September 30, 2008, follow:
   A v e R A G e t o t A l A v e R A G e 
   e x e R C i s e p R i C e i n t Rin s i Cv A l u e R e m A i n i n G 
(s h A R e s int h o u s A n d s )   p e R s h A R e s h A R e s o f A w A R d s C o n t R A C t u A l l i f e
Beginning of year $29.80 13,670
Options granted $53.66 3,807
Options exercised $28.29 (3,009)
Options canceled $44.36 (117)
End of year $36.31 14,351 $107 5.6
Exercisable at year-end $29.03 9,600 $106 4.0