Emerson 2009 Annual Report Download - page 43

Annual Report 41
The principal items that gave rise to deferred income tax assets and liabilities follow:
      2008  2009
Deferred tax assets:
Net operating losses and tax credits $ 249
279
Accrued liabilities 189 186
Postretirement and postemployment benefits 170 181
Employee compensation and benefits 146 160
Pensions – 118
Capital loss carryforwards 18 19
Other 152 131
Total 924 1,074
Valuation allowances (146) (103)
Deferred tax liabilities:
Intangibles (437) (587)
Property, plant and equipment (221) (233)
Leveraged leases (79) (59)
Pensions (94) –
Other (53) (75)
Total (884) (954)
Net deferred income tax asset (liability) $(106) 17
At September 30, 2009 and 2008, respectively, net current deferred tax assets were $290 and $328, and net noncur-
rent deferred tax liabilities were $273 and $434. Total income taxes paid were approximately $780, $1,110 and $960 in
2009, 2008 and 2007, respectively. The capital loss carryforwards of $19 expire in 2012. The majority of the $279 net
operating losses and tax credits can be carried forward indenitely, while the remainders expire over varying periods.
Valuation allowances decreased $43 due primarily to recognition of a net operating loss carryforward resulting from
the restructuring of a foreign subsidiary.
Effective October 1, 2007, the Company adopted the recognition and disclosure provisions of FASB Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes” (now part of ASC 740, Income Taxes), which addresses the
accounting for uncertain tax positions a company has taken or expects to take when ling a tax return. As a result of
adoption, the Company recorded a charge of $6 to beginning retained earnings. Following are reconciliations of the
beginning and ending balances of unrecognized tax benets before recoverability of cross-jurisdictional tax credits
(federal, state and non-U.S.) and temporary differences. The amount of unrecognized tax benets is not expected to
signicantly increase or decrease within the next 12 months.
      2008  2009
Beginning balance, at October 1 $149 168
Additions for current year tax positions 33 17
Additions for prior years tax positions 27 14
Reductions for prior years tax positions (26) (24)
Reductions for settlements with tax authorities (9) (10)
Reductions for expirations of statute of limitations (6) (6)
 $168 159
If none of the unrecognized tax benets shown is ultimately paid, the tax provision and the calculation of the effective
tax rate would be favorably impacted by $110. The Company accrues interest and penalties related to income taxes
in income tax expense. Total interest and penalties recognized were $6 and $7 in 2009 and 2008, respectively. As of
September 30, 2009 and 2008, total accrued interest and penalties were $33 and $27, respectively.
The United States is the major jurisdiction for which the Company les income tax returns. Examinations by the U.S.
Internal Revenue Service are substantially complete through scal 2007. The status of state and non-U.S. tax examina-
tions varies by the numerous legal entities and jurisdictions in which the Company operates.