Sara Lee 2008 Annual Report Download - page 75

Our total unrecognized tax benefits that, if recognized, would
affect our effective tax rate were $556 and $562 as of June 28,
2008 and June 30, 2007. At this time the corporation estimates
that it is reasonably possible that the liability for unrecognized tax
benefits will decrease by approximately $10 – $30 in the next 12
months from a variety of uncertain tax positions as a result of the
completion of various worldwide tax audits currently in process and
the expiration of the statute of limitations in several jurisdictions.
The company recognizes interest and penalties related to
unrecognized tax benefits in tax expense. As of June 28, 2008, and
June 30, 2007 the corporation had accrued interest and accrued
penalties of approximately $96 million.
As the result of the completion of tax audits and the expiration
of statutes of limitations in France, Morocco, the Netherlands, the
Philippines and various state and local jurisdictions, there was a
decrease in the gross liability for uncertain tax positions of $114
for 12 months ended June 28, 2008. Of this amount $58 relates
to the completion of tax audits and $56 relates to the expiration
of statutes. This decrease was offset by $102 of increases to
reserves for uncertain tax positions and $50 of unfavorable foreign
currency exchange impacts. As a result, the net decrease in the
gross liabilities for uncertain tax positions was $2, resulting in
an ending balance of $617 as of June 28, 2008.
The corporation’s tax returns are routinely audited by federal, state
and foreign tax authorities and these audits are at various stages
of completion at any given time. The Internal Revenue Service (IRS)
has completed examinations of the company’s U.S. income tax
returns through July 3, 2004. Fiscal years remaining open to exami-
nation in the Netherlands include 2003 and forward. Other foreign
jurisdictions remain open to audits ranging from 1999 to 2007.
With few exceptions, the company is no longer subject to state and
local income tax examinations by tax authorities for years before
June 28, 2003.
The following table presents a reconciliation of the beginning
and ending amount of unrecognized tax benefits for the year ended
June 28, 2008.
2008
Unrecognized tax benefits
Balance at July 1, 2007 $619
Increases based on tax positions related to the current period 96
Increases based on tax positions related to prior periods 6
Decreases based on tax positions related to prior periods (40)
Decreases related to settlements with the taxing authorities (58)
Decreases related to a lapse of applicable statute of limitations (56)
Foreign currency translation adjustment 50
Balance at June 28, 2008 $617
Note 22 – Business Segment Information
The following are the corporation’s six business segments and the
types of products and services from which each reportable segment
derives its revenues.
•North American Retail Meats sells a variety of meat products to
retail customers in North America, including hot dogs and corn dogs,
breakfast sausages and sandwiches, smoked and dinner sausages,
premium deli and luncheon meats, bacon, and cooked hams.
•North American Retail Bakery sells a wide variety of fresh
and frozen baked products and specialty items to retail customers
in North America and includes the corporation’s U.S.
Senseo retail
coffee business. Such products include bread, buns, bagels, rolls,
muffins, specialty bread, frozen pies, cakes, cheesecakes and
other desserts.
•Foodservice sells meat, bakery and coffee products to the
following customers in North America: broad-line foodservice
distributors, restaurants, hospitals and other large institutions.
•International Beverage sells coffee and tea products to retail
and foodservice customers in certain markets around the world,
including Europe, Australia and Brazil.
•International Bakery sells a variety of bakery and dough prod-
ucts to retail and foodservice customers in Europe and Australia.
•Household and Body Care produces and sells products in
four primary product categories: body care, air care, shoe care
and insecticides.
The corporation’s management uses operating segment income,
which is defined as operating income before general corporate
expenses and amortization of trademarks and customer relation-
ship intangibles, to evaluate segment performance and allocate
resources. Management believes it is appropriate to disclose this
measure to help investors analyze the business performance and
trends of the various business segments. Interest and other debt
expense, as well as income tax expense, are centrally managed,
and accordingly, such items are not presented by segment since
they are not included in the measure of segment profitability reviewed
by management. The accounting policies of the segments are the
same as those described in Note 2 to the Consolidated Financial
Statements, “Summary of Significant Accounting Policies.”
Sara Lee Corporation and Subsidiaries 73