Kimberly-Clark 2007 Annual Report Download - page 94

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Accounting for Uncertainty in Income Taxes
The Corporation adopted Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an
interpretation of FASB Statement No. 109, Accounting for Income Taxes (“FIN 48”), effective January 1, 2007.
As a result, the Corporation recorded an increase in income tax liabilities for uncertain tax benefits and a
decrease in retained earnings of $34.2 million resulting from a cumulative effect adjustment. As required by FIN
48, the Corporation has classified the amounts recorded for uncertain tax positions in the Consolidated Balance
Sheet as other liabilities (non-current) to the extent that payment is not anticipated within one year. Prior year
financial statements have not been restated. Presented below is a reconciliation of the beginning and ending
amounts of unrecognized income tax benefits:
2007
(Millions of dollars)
Balance at January 1 ........................................................... $490.9
Gross increases for tax positions of prior years ...................................... 35.3
Gross decreases for tax positions of prior years ...................................... (22.6)
Gross increases for tax positions of the current year .................................. 40.2
Settlements .................................................................. (117.1)
Lapse of statute of limitations ................................................... (1.0)
Currency .................................................................... 12.1
Balance at December 31 ........................................................ $437.8
As of December 31, 2007, approximately $320 million of the $437.8 million of unrecognized tax benefits
would reduce the Corporation’s effective tax rate if recognized.
The Corporation recognizes accrued interest and penalties related to unrecognized tax benefits in income tax
expense. During the years ended December 31, 2007, 2006 and 2005, the Corporation recognized a net benefit of
$11.0 million, a net cost of $4.9 million and a net benefit of $5.1 million, respectively, in interest and penalties.
Total accrued penalties and net accrued interest was approximately $24 million and $37 million at December 31
and January 1, 2007, respectively.
It is reasonably possible that a number of uncertainties could be settled within the next 12 months. The most
significant uncertainties involve transfer pricing, which may be resolved by entering into a revised advance
pricing agreement between the U.S. and the U.K., and uncertainties related to questions about certain financing
structures. Various other uncertain tax positions related to federal taxes are being discussed at the IRS Appeals
level in the U.S. Other less significant uncertain tax positions also may be settled of which none are individually
significant. Settlement of these matters is not expected to have a material effect on the Corporation’s financial
condition, results of operations or liquidity.
As of December 31, 2007, the following tax years remain subject to examination for the major jurisdictions
where the Corporation conducts business:
Jurisdiction Years
United States ................................................................... 2004 to 2007
United Kingdom ................................................................. 2004 to 2007
Canada ........................................................................ 2003 to 2007
Korea ......................................................................... 2004 to 2007
Australia ....................................................................... 2003 to 2007
74