Kodak 2005 Annual Report Download - page 67

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A material weakness is a control defi ciency, or combination of control defi ciencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim fi nancial statements will not be prevented or detected. The following material weakness has been identifi ed and
included in management’s assessment as of December 31, 2005.
As of December 31, 2005, management has concluded that the controls surrounding the completeness and accuracy of the Company’s deferred
income tax valuation allowance account were ineffective. Specifi cally, certain incorrect assumptions were made with respect to certain deferred
income tax valuation allowance computations that were not detected in the related review and approval process. This control defi ciency resulted in
audit adjustments to the 2005 consolidated fi nancial statements. In addition, this control defi ciency could result in a misstatement of the deferred
income tax valuation allowance account and the related provision for income taxes that would result in a material misstatement to annual or interim
fi nancial statements that would not be prevented or detected.
This control defi ciency was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2005 consolidated
fi nancial statements, and our opinion regarding the effectiveness of the Company’s internal control over fi nancial reporting does not affect our opinion
on those consolidated fi nancial statements.
As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Kodak Polychrome Graphics and Creo
Inc. from its assessment of internal control over fi nancial reporting as of December 31, 2005 because they were acquired by the Company in purchase
business combinations during 2005. We have also excluded Kodak Polychrome Graphics and Creo Inc. from our audit of internal control over fi nancial
reporting. Kodak Polychrome Graphics and Creo Inc. are wholly owned subsidiaries of the Company that represent 9% and 8%, respectively, of the
consolidated total assets and 9% and 3%, respectively, of consolidated revenue as of and for the year ended December 31, 2005.
In our opinion, management’s assessment that Eastman Kodak Company did not maintain effective internal control over fi nancial reporting as of
December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control - Integrated Framework issued by the
COSO. Also, in our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control
criteria, Eastman Kodak Company has not maintained effective internal control over fi nancial reporting as of December 31, 2005, based on criteria
established in Internal Control - Integrated Framework issued by the COSO.
PricewaterhouseCoopers LLP
Rochester, New York
March 1, 2006