Kodak 2014 Annual Report Download - page 83

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 had
approximately $18 million of interest and penalties associated with uncertain tax benefits accrued as of both December 31, 2014 and 2013.
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 $10 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 2014, Kodak reached a settlement outside of the U.S. and settled an audit for calendar year 2003. Kodak originally recorded liabilities for uncertain tax positions
(“UTPs”) totaling $8 million (plus interest of approximately $2 million). The settlement resulted in a reduction in Other current liabilities and the recognition of a $10 million
tax benefit.
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 UTPs totaling $12 million (plus interest of approximately $4 million). The settlement resulted in a reduction in Other current liabilities and the
recognition of a $16 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 2013 remain subject to examination by the respective foreign tax jurisdiction authorities.
Successor
Predecessor
(in millions)
Year Ended
December 31,
2014
Four Months
Ended
December 31,
2013
Eight Months
Ended
August 31,
2013
Year Ended
December 31,
2012
Balance as of January 1
$
106
$
107
$
57
$
76
Tax positions related to the current year:
Additions
2
-
68
4
Tax Positions related to prior years:
Additions
1
2
1
3
Reductions
(14
)
(3
)
(17
)
(17
)
Settlements with taxing jurisdictions
(1
)
-
(2
)
(3
)
Lapses in Statute of limitations
(2
)
-
-
(6
)
Balance as of December 31
$
92
$
106
$
107
$
57
80