MasterCard 2009 Annual Report Download - page 72

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The Company’s GAAP effective income tax rate for 2008 was significantly affected by the tax benefits
related to the charges for the Discover Settlement and the American Express Settlement. Due to the
non-recurring nature of these items, the Company believes that the calculation of the 2008 effective tax rate,
excluding the impacts of the Discover Settlement and the American Express Settlement, will be helpful in
comparing effective tax rates for 2009, 2008 and 2007.
GAAP effective tax rate calculation
2009 2008 2007
(In millions, except percentages)
Income (loss) before income taxes .................................. $2,218 $(383) $1,671
Income tax expense (benefit)1..................................... 755 (129) 586
Net income (loss) ............................................... $1,463 $(254) $1,086
Effective tax rate ............................................... 34.1% 33.7% 35.0%
Non-GAAP effective tax rate calculation
2009 2008 2007
(In millions, except percentages)
GAAP income (loss) before income taxes ............................ $2,218 $ (383) $1,671
Litigation settlements ............................................ 7 2,483 3
Non-GAAP income before income taxes ............................. $2,225 $2,100 $1,674
Income tax expense (benefit)1..................................... 755 (129) 586
Impact of litigation settlements on income tax expense (benefit) .......... (2) (941) (1)
Non-GAAP income tax expense ................................... 758 812 587
Non-GAAP net income .......................................... $1,467 $1,288 $1,087
Non-GAAP effective tax rate ...................................... 34.1% 38.7% 35.0%
* Note that figures in the above table may not sum due to rounding.
1The 2008 litigation settlements will be deductible in future periods as payments are made and are therefore
considered in the calculation of non-GAAP income tax expense.
During 2009, the Company’s unrecognized tax benefits related to tax positions taken during the current and
prior periods decreased by $17 million. The decrease in the Company’s unrecognized tax benefits for 2009 is
primarily due to changes in judgment related to prior year tax positions, as well as from the effective settlement
of examinations with the IRS. As of December 31, 2009, the Company’s unrecognized tax benefits related to
positions taken during the current and prior periods was $146 million, all of which would reduce the Company’s
effective tax rate if recognized.
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