Medtronic 2012 Annual Report Download - page 120

Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
103
The provision for income taxes from continuing operations consists of the following:
Fiscal Year
_________________________________________
(in millions) 2012 2011 2010
___________ ____________ ___________ ____________
Current tax expense:
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 664 $ 360 $ 515
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231 188 237
____________ ___________ ____________
Total current tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 895 548 752
Deferred tax expense (benefit):
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (138) 51 111
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27) 10 (2)
____________ ___________ ____________
Net deferred tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . (165) 61 109
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Total provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . $ 730 $ 609 $ 861
____________ ___________ ____________
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Deferred taxes arise because of the different treatment of transactions for financial statement
accounting and income tax accounting, known as “temporary differences.” The Company records the tax
effect of these temporary differences as “deferred tax assets” and “deferred tax liabilities.” Deferred tax
assets generally represent items that can be used as a tax deduction or credit in a tax return in future years
for which the Company has already recorded the tax benefit in the consolidated statements of earnings.
The Company establishes valuation allowances for deferred tax assets when the amount of expected future
taxable income is not likely to support the use of the deduction or credit. The Company has established
valuation allowances for federal, state, and foreign net operating losses, credit carryforwards, capital loss
carryforwards, and deferred tax assets which are capital in nature of $387 million and $286 million at April 27,
2012 and April 29, 2011, respectively. These carryover attributes expire at various points in time, from within
a year to no expiration date. These valuation allowances would result in a reduction to the provision for
income taxes in the consolidated statements of earnings, if they are ultimately not required. Deferred tax
liabilities generally represent tax expense recognized in the consolidated financial statements for which
payment has been deferred or expense has already been taken as a deduction on the Company’s tax return
but has not yet been recognized as an expense in the consolidated statements of earnings. Deferred tax
assets/(liabilities), shown before jurisdictional netting, are comprised of the following:
(in millions) April 27, 2012 April 29, 2011
___________ _____________ _____________
Deferred tax assets:
Net operating loss, capital loss, and credit carryforwards . . . . . . . . . . . . . . $ 496 $ 379
Inventory (intercompany profit in inventory and
excess of tax over book valuation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 462 361
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266 210
Pension and post-retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256 138
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233 233
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 164
Federal and state benefit on uncertain tax positions . . . . . . . . . . . . . . . . . . 129 133
_____________ _____________
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,063 1,618
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (387) (286)
_____________ _____________
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,676 1,332
Deferred tax liabilities:
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (710) (695)
Basis impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (178) (44)
Realized loss on derivative financial instruments . . . . . . . . . . . . . . . . . . . . (112) (112)
Unrealized gain on available-for-sale securities and
derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (77) (10)
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (68) (57)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31) (45)
_____________ _____________
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,176) (963)
_____________ _____________
Deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 500 $ 369
_____________ _____________
Reported as (after jurisdictional netting): . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 640 $ 523
Long-term deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504 314
Deferred tax liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33) (7)
Long-term deferred tax liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (611) (461)
_____________ _____________
Deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 500 $ 369
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