Home Depot 2015 Annual Report Download - page 53

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The Company has not provided for deferred income taxes on approximately $3.5 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. In fiscal 2015, the
Company settled its appeal of certain proposed examination adjustments with the Internal Revenue Service ("IRS") for fiscal
years 2005 through 2007. One issue remains open for these fiscal years pending negotiations between the U.S. and Mexican
tax authorities. The Company’s U.S. federal tax returns for fiscal years 2008 through 2012 are currently under examination
by the IRS. There are also ongoing U.S. state and local and other foreign audits covering fiscal years 2005 through 2013. The
Company does not expect the results from any income tax audit to have a material impact on the Company’s consolidated
financial condition, results of operations or cash flows.
Over the next twelve months, it is reasonably possible that the resolution of federal and state tax examinations could reduce
the Company’s unrecognized tax benefits by $175 million. Final settlement of these audit issues may result in payments that
are more or less than this amount, but the Company does not anticipate the resolution of these matters will result in a material
change to its consolidated financial condition or results of operations.
Reconciliations of the beginning and ending amount of gross unrecognized tax benefits for fiscal 2015, 2014 and 2013 were
as follows (amounts in millions):
January 31,
2016 February 1, 2015 February 2, 2014
Unrecognized tax benefits balance at beginning of fiscal year $ 765 $ 790 $ 638
Additions based on tax positions related to the current year 169 179 160
Additions for tax positions of prior years 126 34 52
Reductions for tax positions of prior years (350)(212)(41)
Reductions due to settlements (14)(7)(12)
Reductions due to lapse of statute of limitations (7)(19)(7)
Unrecognized tax benefits balance at end of fiscal year $ 689 $ 765 $ 790
The amount of unrecognized tax benefits that if recognized would affect the annual effective income tax rate on Net Earnings
was $382 million, $318 million and $344 million as of January 31, 2016, February 1, 2015 and February 2, 2014,
respectively.
Net adjustments to accruals for interest and penalties associated with uncertain tax positions resulted in expenses of $5
million, $2 million and $7 million in fiscal 2015, 2014 and 2013, respectively. Total accrued interest and penalties as of
January 31, 2016 and February 1, 2015 were $89 million and $104 million, respectively. Interest and penalties are included in
Interest Expense and SG&A, respectively, in the accompanying Consolidated Statements of Earnings.