Emerson 2011 Annual Report Download - page 45

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Annual Report | 43
(13) Income Taxes
Pretax earnings from continuing operations consist of the following:
2009 2010 2011
United States $1,169 1,303 1,891
Non-U.S. 1,281 1,576 1,740
Total pretax earnings from continuing operations $2,450 2,879 3,631
The principal components of income tax expense follow:
2009 2010 2011
Current:
Federal $230 496
503
State and local 25 33 37
Non-U.S. 313 413 477
Deferred:
Federal 149 (55) 149
State and local 9 (1) 3
Non-U.S. (38) (38) (42)
Income tax expense $688 848 1,127
Reconciliations of the U.S. federal statutory tax rate to the Company’s effective tax rate follow:
2009 2010 2011
Federal rate 35.0% 35.0% 35.0%
State and local taxes, net of federal tax benefit 0.9 0.7 0.7
Non-U.S. rate differential (4.6) (4.5) (3.5)
Non-U.S. tax holidays (2.0) (2.2) (1.0)
U.S. manufacturing deduction (0.8) (0.6) (1.1)
Other (0.4) 1.0 0.9
Effective income tax rate 28.1% 29.4% 31.0%
Non-U.S. tax holidays reduce tax rates in certain foreign jurisdictions and are expected to expire over the next seven years.
Following are reconciliations of the beginning and ending balances of unrecognized tax benefits before recoverability
of cross-jurisdictional tax credits (federal, state and non-U.S.) and temporary differences. The amount of unrecognized
tax benefits is not expected to significantly increase or decrease within the next 12 months.
2010 2011
Beginning balance, at October 1 $159 170
Additions for current year tax positions 48 13
Additions for prior year tax positions 20 27
Reduction for prior year tax positions (34) (22)
Reduction for settlements with tax authorities (10) (7)
Reduction for expirations of statue of limitations (13) (19)
Ending balance, at September 30 $170 162
If none of the unrecognized tax benefits shown is ultimately paid, the tax provision and the calculation of the effective
tax rate would be favorably impacted by $126. The Company accrues interest and penalties related to income taxes
in income tax expense. Total interest and penalties recognized were $(3), $(1) and $6 in 2011, 2010 and 2009, respec-
tively. As of September 30, 2011 and 2010, total accrued interest and penalties were $36 and $37, respectively.