Proctor and Gamble 2005 Annual Report Download - page 62
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Please find page 62 of the 2005 Proctor and Gamble annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Management’sDiscussionandAnalysisTheProcter&GambleCompanyandSubsidiaries
58
In1991,theESOPborrowedanadditional$1.00billion.Theproceeds
wereusedtopurchaseSeriesBESOPConvertibleClassAPreferred
Stocktofundaportionofretireehealthcarebenefits.Thesesharesare
consideredplanassets,netoftheassociateddebt,oftheOtherRetiree
Benefitsplandiscussedabove.Debtservicerequirementsarefunded
bypreferredstockdividendsandcashcontributionsandadvancesfrom
theCompany.Eachshareisconvertibleattheoptionoftheholder
intooneshareoftheCompany’scommonstock.Thedividendforthe
currentyearwas$1.05pershare.Theliquidationvalueis$12.96
pershare.
AspermittedbyStatementofPosition(SOP)93-6,“Employers
AccountingforEmployeeStockOwnershipPlans,”wehaveelected,
whereapplicable,tocontinueourpractices,whicharebasedonSOP
76-3,“AccountingPracticesforCertainEmployeeStockOwnership
Plans.”ESOPdebt,whichisguaranteedbytheCompany,isrecordedas
debt(seeNote5).PreferredsharesissuedtotheESOPareoffsetbythe
ReserveforESOPDebtRetirementintheConsolidatedBalanceSheets
andtheConsolidatedStatementsofShareholders’Equity.Advances
totheESOParerecordedasanincreaseintheReserveforESOPDebt
Retirement.InterestincurredontheESOPdebtisrecordedasinterest
expense.Dividendsonallpreferredshares,netofrelatedtaxbenefits,
arechargedtoretainedearnings.
AsrequiredbySOP76-3,thepreferredsharesoftheESOPareallocated
basedondebtservicerequirements,netofadvancesmadebythe
CompanytotheTrust.Thenumberofpreferredsharesoutstandingat
June30,wasasfollows:
Forpurposesofcalculatingdilutednetearningspercommonshare,
thepreferredsharesheldbytheESOPareconsideredconverted
frominception.Dilutednetearningsarecalculatedassumingthatall
preferredsharesareconvertedtocommon,andthereforeareadjusted
toreflecttheincrementalESOPfundingthatwouldberequireddueto
thedifferenceindividendratebetweenpreferredandcommonshares
(seeNote7).
Note9IncomeTaxes
UnderSFASNo.109,“AccountingforIncomeTaxes,”incometaxesare
recognizedfortheamountoftaxespayableforthecurrentyearandfor
theimpactofdeferredtaxliabilitiesandassets,whichrepresentfuture
taxconsequencesofeventsthathavebeenrecognizeddifferentlyin
thefinancialstatementsthanfortaxpurposes.Deferredtaxassetsand
liabilitiesareestablishedusingtheenactedstatutorytaxratesandare
adjustedforchangesinsuchratesintheperiodofchange.
Earningsbeforeincometaxesconsistedofthefollowing:
Managementjudgmentisrequiredindeterminingtaxprovisionsand
evaluatingtaxpositions.Managementbelievesitstaxpositionsand
relatedprovisionsreflectedintheconsolidatedfinancialstatements
arefullysupportable.Weestablishreservesforadditionalincometaxes
thatmaybechallengedbylocalauthoritiesandmaynotbefully
sustained,despiteourbeliefthattheunderlyingtaxpositionsare
fullysupportable.Insuchcases,thereservesforadditionaltaxesare
basedonmanagement’sbestestimateoftheultimateoutcome.These
reservesarereviewedonanongoingbasisandareadjustedinlight
ofchangingfactsandcircumstances,includingprogressontaxaudits,
changesininterpretationsoftaxlaws,developmentsincaselawand
closingofstatutesoflimitations.Ourtaxprovisionincludestheimpact
ofrecordingreservesandanychangesthereto.Wehaveanumberof
taxauditsinprocessandhaveopentaxyearswithvarioussignificant
taxingjurisdictionsthatrangeprimarilyfrom1993to2005.Although
theresultsofcurrenttaxauditsandadjustmentsfromothertax
positionsrelatedtoopentaxyearshavenotbeenfinalized,webelieve
basedoncurrentlyavailableinformationthattheultimateoutcomes
willnothaveamaterialadverseeffectonourfinancialposition,results
ofoperationsorcashflows.
NotestoConsolidatedFinancialStatements58 TheProcter&GambleCompanyandSubsidiaries
Millionsofdollarsexceptpershareamountsorotherwisespecified.
June30
SharesinThousands 2004 2003
Allocated 62,511 64,492
Unallocated 28,296 31,534
90,807 96,026
Allocated 21,399 20,648
Unallocated 48,528 50,718
69,927 71,366
YearsendedJune30
2004 2003
UnitedStates $6,023 $4,920
International 3,327 2,610
9,350 7,530