Home Depot 2011 Annual Report Download - page 50

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Current deferred tax assets and current deferred tax liabilities are netted by tax jurisdiction and noncurrent deferred tax assets
and noncurrent deferred tax liabilities are netted by tax jurisdiction, and are included in the accompanying Consolidated
Balance Sheets as follows (amounts in millions):
Other Current Assets
Other Assets
Other Accrued Expenses
Deferred Income Taxes
Net Deferred Tax Assets
January 29,
2012
$ 454
25
(3)
(340)
$ 136
January 30,
2011
$ 553
21
(5)
(272)
$ 297
The Company believes that the realization of the deferred tax assets is more likely than not, based upon the expectation that it
will generate the necessary taxable income in future periods, and except for certain net operating losses discussed below, no
valuation reserves have been provided.
At January 29, 2012, the Company had state and foreign net operating loss carryforwards available to reduce future taxable
income, expiring at various dates from 2011 to 2028. Management has concluded that it is more likely than not that the tax
benefits related to the state net operating losses will be realized. However, it is unlikely that the Company will be able to
utilize certain foreign net operating losses. Therefore, a valuation allowance has been provided to reduce the deferred tax
asset related to foreign net operating losses to an amount that is more likely than not to be realized. Total valuation
allowances related to net operating losses at January 29, 2012 and January 30, 2011 were $19 million and $21 million,
respectively.
As of January 30, 2011, the Company had a valuation allowance of $45 million related to capital loss carryforwards. During
the fiscal year ended January 29, 2012, the Company was able to utilize a portion of its capital loss carryforward. This
utilization combined with other available tax planning strategies enabled the Company to release the $45 million valuation
allowance associated with the capital loss carryforward.
The Company had no foreign tax credit carryforwards as of January 29, 2012 and $30 million as of January 30, 2011. During
the fiscal year ended January 29, 2012, the Company generated sufficient foreign source income to fully utilize the foreign
tax credit carryforward from the prior year.
The Company has not provided for deferred income taxes on approximately $2.4 billion of undistributed earnings of
international subsidiaries because of its intention to indefinitely reinvest these earnings outside the U.S. The determination of
the amount of the unrecognized deferred income tax liability related to the undistributed earnings is not practicable; however,
unrecognized foreign income tax credits would be available to reduce a portion of this liability.
The Company’s income tax returns are routinely examined by domestic and foreign tax authorities. The Company’s U.S.
federal and Canadian tax returns for fiscal years 2005 through 2009 are currently under audit by the Internal Revenue
Service. The Company's Canadian operations are currently under audit by the Canada Revenue Agency for fiscal years 2005
to 2007. There are also ongoing U.S. state and local and other foreign audits covering tax years 2003 to 2010. At this time,
the Company does not expect the results from any income tax audit to have a material impact on the Company’s financial
statements.
The Company believes that certain adjustments under examination by the IRS and in certain states will be agreed upon within
the next twelve months. The Company has classified approximately $97 million of the reserve for unrecognized tax benefits
as a short-term liability in the accompanying Consolidated Balance Sheets. Final settlement of these audit issues may result
in payments that are more or less than these amounts, but the Company does not anticipate the resolution of these matters will
result in a material change to its consolidated financial position or results of operations.