McKesson 2009 Annual Report Download - page 96

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
90
Deferred tax balances consisted of the following:
March 31,
(In millions) 2009 2008
Assets
Receivable allowances $ 70 $ 57
Deferred revenue 170 124
Compensation and benefit-related accruals 274 286
AWP Litigation accrual 172 -
Loss and credit carryforwards 529 566
Other 357 257
Subtotal 1,572 1,290
Less: valuation allowance (125) (27)
Total assets $ 1,447 $ 1,263
Liabilities
Basis difference for inventory valuation and other assets $ (1,286) $ (1,097)
Basis difference for fixed assets and systems development costs (207) (163)
Intangibles (238) (154)
Other (158) (141)
Total liabilities (1,889) (1,555)
Net deferred tax liability $ (442) $ (292)
Current net deferred tax liability $ (695) $ (767)
Long term net deferred tax asset 253 475
Net deferred tax liability $ (442) $ (292)
We have federal, state and foreign income tax net operating loss carryforwards of $267 million, $2,731 million
and $185 million. The federal and state net operating losses will expire at various dates from 2010 through 2029.
The foreign net operating losses have indefinite lives. We believe that it is more likely than not that the benefit from
certain federal, state and foreign net operating loss carryforwards may not be realized. In recognition of this risk, we
have provided valuation allowances of $5 million, $36 million and $39 million on the deferred tax assets relating to
these federal, state and foreign net operating loss carryforwards. We also have federal and state capital loss
carryforwards of $43 million and $37 million. The federal and state net operating losses will expire at various dates
from 2011 through 2029. We believe that it is more likely than not that the benefit from these capital loss
carryforwards may not be realized. In recognition of this risk, we have provided valuation allowances of $15
million and $3 million.
We also have domestic income tax credit carryforwards of $202 million which are primarily alternative
minimum tax credit carryforwards that have an indefinite life. However, we believe that it is more likely than not
that the benefit from certain state tax credits of $4 million may not be realized. In recognition of this risk, we have
provided a valuation allowance of $4 million. In addition, we have federal and Canadian research and development
credit carryforwards of $61 million and $11 million. The federal and Canadian research and development credits
will expire at various dates from 2017 to 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.