Hess 2008 Annual Report Download - page 82

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In the consolidated balance sheet at December 31 deferred tax assets and liabilities from the preceding table
are netted by taxing jurisdiction and are recorded in the following captions:
2008 2007
(Millions of dollars)
Other current assets ............................................. $ 188 $ 211
Deferred income taxes (long-term asset) .............................. 2,292 1,873
Accrued liabilities .............................................. (199) (27)
Deferred income taxes (long-term liability) . . . ......................... (2,241) (2,362)
Net deferred tax assets (liabilities) ................................ $40$ (305)
The difference between the Corporation’s effective income tax rate and the United States statutory rate is
reconciled below:
2008 2007 2006
United States statutory rate....................................... 35.0% 35.0% 35.0%
Effect of foreign operations ...................................... 13.0 15.6 17.5
State income taxes, net of Federal income tax ......................... 0.1 (2.6) 0.3
Other ....................................................... 1.7 2.5 (0.3)
Total ..................................................... 49.8% 50.5% 52.5%
Below is a reconciliation of the beginning and ending amount of unrecognized tax benefits (millions of
dollars):
2008 2007
Balance at January 1 ................................................ $165 $142
Additions based on tax positions taken in the current year ..................... 16 38
Additions based on tax positions of prior years ............................. 11 5
Reductions based on tax positions of prior years ............................ (15) —
Reductions due to settlements with taxing authorities ........................ (2) (20)
Balance at December 31 ............................................. $175 $165
At December 31, 2008, the unrecognized tax benefits include $145 million which, if recognized, would affect
the Corporation’s effective income tax rate. Over the next 12 months, it is reasonably possible that the total amount
of unrecognized tax benefits could decrease by up to $30 million due to settlements with taxing authorities.
The Corporation has not recorded deferred income taxes applicable to undistributed earnings of foreign
subsidiaries that are expected to be indefinitely reinvested in foreign operations. The Corporation had undistributed
earnings from foreign subsidiaries of approximately $7.1 billion at December 31, 2008. If the earnings of foreign
subsidiaries were not indefinitely reinvested, a deferred tax liability of approximately $2.5 billion would be
required, excluding the potential use of foreign tax credits in the United States.
The Corporation and its subsidiaries file income tax returns in the United States and various foreign
jurisdictions. The Corporation is no longer subject to examinations by income tax authorities in most
jurisdictions for years prior to 2003.
66
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)