Motorola 2007 Annual Report Download - page 105

future, and (ii) reversals of valuation reserves recorded as an offset to Non-owner changes to equity and Goodwill
in the Company’s consolidated balance sheets.
The valuation allowances relate primarily to tax carryforwards, including tax carryforwards of acquired
businesses which have limitations upon their use, state tax carryforwards with short expiration periods and future
capital losses related to certain investments. Additionally, $37 million of valuation reserves relate to deferred tax
assets established in connection with acquisitions which, if reversed, would be a reduction in goodwill or other
identifiable intangible assets. The Company believes that the remaining deferred tax assets are more likely than not
to be realizable based on estimates of future taxable income and the implementation of tax planning strategies.
Tax carryforwards at December 31, 2007 are as follows:
Gross
Tax Loss Tax Effected Expiration Period
United States:
U.S. tax losses $1,422 $ 498 2019-2027
Foreign tax credits n/a 814 2013-2017
General business credits n/a 523 2018-2027
Minimum tax credits n/a 107 Unlimited
Capital losses 36 13 2011
State tax losses 3,367 102 2008-2027
State tax credits n/a 54 2009-2024
Non-U.S. Subsidiaries:
United Kingdom tax losses 572 160 Unlimited
Germany tax losses 374 108 Unlimited
Brazil hedge losses 66 22 Unlimited
Turkey tax losses 105 21 2012
Israel tax losses 75 20 Unlimited
Korea tax losses 45 12 2008
Other subsidiaries tax losses 51 14 Various
Spain tax credits n/a 32 2014-2021
Other subsidiaries tax credits n/a 53 Unlimited
$2,553
The Company adopted FIN 48 on January 1, 2007. The adoption resulted in a $120 million reduction of the
Company’s unrecognized tax benefits and related interest accrual and has been reflected as an increase in the
opening balance of Retained earnings of $27 million and Additional paid-in capital of $93 million as of January 1,
2007. Upon the adoption of FIN 48, the Company also reclassified unrecognized tax benefits of $877 million from
Deferred income tax to Other liabilities in the Company’s consolidated balance sheets.
A reconciliation of unrecognized tax benefits, including those attributable to discontinued operations, is as follows:
2007
Balance at January 1 $1,274
Additions based on tax positions related to current year 46
Additions for tax positions of prior years
(1)
197
Reductions for tax positions of prior years (114)
Settlements (3)
Balance at December 31 $1,400
(1) Includes acquisitions.
Included in the balance of total unrecognized tax benefits at December 31, 2007, are potential benefits of
approximately $590 million, net of federal tax benefits, that if recognized, would affect the effective tax rate.
At December 31, 2007 the Company had $86 million and $10 million accrued for interest and penalties,
respectively, on unrecognized tax benefits.
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