Kodak 2013 Annual Report Download - page 104

Table of Contents
Accounting for Uncertainty in Income Taxes
A reconciliation of the beginning and ending amount of Kodak’s liability for income taxes associated with unrecognized tax benefits is as
follows:
Kodak’s policy regarding interest and/or penalties related to income tax matters is to recognize such items as a component of income tax
(benefit) expense. Kodak recognized interest and penalties of approximately $0 million, $2 million, $2 million and $(60) million, in income tax
(benefit) expense for the four months ended December 31, 2013, eight months ended August 31, 2013 and for the years ended December 31,
2012 and 2011, respectively. Additionally, Kodak had approximately $18 million and $16 million of interest and penalties associated with
uncertain tax benefits accrued as of December 31, 2013 and 2012, respectively.
If the unrecognized tax benefits were recognized, they would favorably affect the effective income tax rate in the period recognized. Kodak has
classified certain income tax liabilities as current or noncurrent based on management’s estimate of when these liabilities will be settled. The
current liabilities are recorded in Other current liabilities in the Consolidated Statement of Financial Position. Noncurrent income tax liabilities
are recorded in Other long-term liabilities in the Consolidated Statement of Financial Position.
It is reasonably possible that the liability associated with Kodak’s unrecognized tax benefits will increase or decrease within the next twelve
months. These changes may be the result of settling ongoing audits or the expiration of statutes of limitations. Such changes to the
unrecognized tax benefits could range from $0 to $15 million based on current estimates. Audit outcomes and the timing of audit settlements
are subject to significant uncertainty. Although management believes that adequate provision has been made for such issues, there is the
possibility that the ultimate resolution of such issues could have an adverse effect on the earnings of Kodak. Conversely, if these issues are
resolved favorably in the future, the related provision would be reduced, thus having a positive impact on earnings.
During 2013, Kodak paid $2 million associated with the resolution of $17 million of various state and local tax claims that were agreed upon
through the bankruptcy process. In addition, Kodak established a $64 million liability for unrecognized tax benefits associated with the
Company’s adoption of the Plan of Reorganization.
During 2012, Kodak agreed to terms with a tax authority outside of the U.S. and settled audits for calendar years 2002 through 2007. For these
years, Kodak originally recorded liabilities for uncertain tax positions (
“UTPs”) totaling $12 million (plus interest of approximately $4
million). The settlement resulted in a reduction in Accrued income and other taxes and the recognition of a $16 million tax benefit.
During 2011, Kodak agreed to terms with the IRS and settled the federal audits for calendar years 2001 through 2005. For these years, Kodak
originally recorded federal and related state liabilities for UTPs totaling $115 million (plus interest of approximately $25 million). The
settlement resulted in a reduction in Accrued income and other taxes of $296 million, the recognition of a $50 million tax benefit, and a
reduction in net deferred tax assets of $246 million.
During 2011, Kodak agreed to terms with a tax authority outside of the U.S. and settled audits for calendar years 2001 and 2002. For these
years, Kodak originally recorded liabilities for UTPs totaling $56 million (plus interest of approximately $43 million). The settlement resulted
in a reduction in Accrued income and other taxes and the recognition of a $94 million tax benefit.
Kodak files numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions.
Kodak has substantially concluded all U.S. federal and state income tax matters for years through 2011. Substantially all material foreign
income tax matters have been concluded for years through 2008. Kodak’s tax matters for the years 2007 through 2012 remain subject to
examination by the respective foreign tax jurisdiction authorities.
PAGE 98
Successor
Predecessor
Four Months
Ended
Eight Months
Ended
For the Year Ended
December 31,
(in millions)
December 31, 2013
August 31, 2013
2012
2011
Balance as of January 1
$
107
$
57
$
76
$
245
Tax positions related to the current year:
Additions
—
68
4
12
Tax Positions related to prior years:
Additions
2
1
3
2
Reductions
(3
)
(17
)
(17
)
(183
)
Settlements with taxing jurisdictions
—
(
2
)
(3
)
—
Lapses in Statute of limitations
—
—
(
6
)
—
Balance as of December 31
$
106
$
107
$
57
$
76