McKesson 2008 Annual Report Download - page 93

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
86
Deferred tax balances consisted of the following:
March 31,
(In millions) 2008 2007
Assets
Receivable allowances $ 57 $ 55
Deferred revenue 124 215
Compensation and benefit-related accruals 286 231
Securities Litigation - 15
Loss and credit carryforwards 566 525
Other 257 228
Subtotal 1,290 1,269
Less: valuation allowance (27) (25)
Total assets $ 1,263 $ 1,244
Liabilities
Basis difference for inventory valuation and other assets $ (1,097) $ (1,097)
Basis difference for fixed assets and systems development costs (163) (161)
Intangibles (154) (160)
Other (141) (106)
Total liabilities (1,555) (1,524)
Net deferred tax liability $ (292) $ (280)
Current net deferred tax liability $ (767) $ (614)
Long term net deferred tax asset 475 334
Net deferred tax liability $ (292) $ (280)
We have federal and state income tax net operating loss carryforwards of $411 million and $2,001 million
which will expire at various dates from 2009 through 2028. We believe that it is more likely than not that the
benefit from certain state net operating loss carryforwards may not be realized. In recognition of this risk, we have
provided a valuation allowance of $27 million on the deferred tax assets relating to these state net operating loss
carryforwards. We have foreign income tax net operating loss carryforwards of $86 million, which have indefinite
lives.
We also have domestic income tax credit carryforwards of $266 million, which are primarily alternative
minimum tax credit carryforwards that have an indefinite life and foreign income tax credit carryforwards of $3
million, which are Canadian research and development credit carryforwards that expire between 2025 and 2028.
We adopted the provisions of FIN No. 48, “Accounting for Uncertainty in Income Taxes” as of April 1, 2007,
which resulted in a reduction of our retained earnings by $46 million. FIN No. 48 clarifies the accounting for
uncertainty in income taxes recognized in the financial statements in accordance with SFAS No. 109, “Accounting
for Income Taxes.” This standard also provides that a tax benefit from an uncertain tax position may be recognized
when it is more likely than not that the position will be sustained upon examination, including resolutions of any
related appeals or litigation processes, based on the technical merits. The amount recognized is measured as the
largest amount of tax benefit that is greater than 50 percent likely of being realized upon effective settlements. This
interpretation also provides guidance on measurement, derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. At April 1, 2007, our “unrecognized tax benefits,” defined
as the aggregate tax effect of differences between tax return positions and the benefits recognized in our financial
statements, amounted to $465 million.