Motorola 2012 Annual Report Download - page 78

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70
Significant components of deferred tax assets (liabilities) are as follows:
December 31 2012 2011
Inventory $1
$38
Accrued liabilities and allowances 134 254
Employee benefits 1,544 1,279
Capitalized items 254 290
Tax basis differences on investments 28 44
Depreciation tax basis differences on fixed assets 19 13
Undistributed non-U.S. earnings (150)(275)
Tax carryforwards 1,155 1,438
Business reorganization 12 13
Warranty and customer reserves 45 44
Deferred revenue and costs 310 218
Valuation allowances (308)(366)
Deferred charges 36 39
Other (63)(46)
$ 3,017 $ 2,983
At December 31, 2012 and 2011, the Company had valuation allowances of $308 million and $366 million, respectively,
against its deferred tax assets, including $272 million and $336 million, respectively, relating to deferred tax assets for non-U.S.
subsidiaries. The Company’s valuation allowances for its non-U.S. subsidiaries had a net decrease of $64 million during 2012.
The decrease in the valuation allowance relating to deferred tax assets of non-U.S. subsidiaries includes a $60 million reduction
for loss carryforwards the Company now expects to utilize, decreases related to current year activity and exchange rate
variances, offset by an increase related to foreign subsidiaries acquired during 2012.
In the first quarter of 2011, the Company reassessed its valuation allowance requirements taking into consideration the
distribution of Motorola Mobility. The Company evaluated all available evidence in its analysis, including the historical and
projected pre-tax profits generated by the Company's U.S. operations. The Company also considered tax planning strategies
that are prudent and can be reasonably implemented. During 2011, the Company recorded $274 million of tax benefits related
to the reversal of a significant portion of the valuation allowance established on U.S. deferred tax assets. The U.S. valuation
allowance as of December 31, 2012 relates to state tax carryforwards and deferred tax assets of a U.S. subsidiary the Company
expects to expire unutilized. 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.