Sears 2011 Annual Report Download - page 89

SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
2011 2010 2009
Effective tax rate reconciliation
Federal income tax rate (benefit rate) ....................................... (35.0)% 35.0% 35.0%
State and local tax (benefit) net of federal tax benefit ........................... (1.3) 0.1 6.0
Federal and state valuation allowance ....................................... 104.1 — —
Nondeductible goodwill impairment ........................................ 11.4 — —
Tax credits ............................................................ (1.5) (13.0) (2.1)
Resolution of income tax matters ........................................... 0.7 (9.2) (6.7)
Canadian repatriation cost on Sears Canada dividend received .................... — 5.3 —
Canadian rate differential on noncontrolling interest ........................... — (0.1) (0.9)
Other ................................................................. (0.2) (1.8) (2.9)
78.2% 16.3% 28.4%
millions
January 28,
2012
January 29,
2011
Deferred tax assets and liabilities
Deferred tax assets:
Federal benefit for state and foreign taxes ................................. $ 151 $ 166
Accruals and other liabilities ........................................... 188 120
Capital leases ....................................................... 125 133
NOL carryforwards ................................................... 672 250
Postretirement benefit plans ............................................ 134 241
Pension ............................................................ 818 550
Deferred revenue ..................................................... 236 230
Credit carryforwards .................................................. 385 356
Other .............................................................. 216 110
Total deferred tax assets ................................................... 2,925 2,156
Valuation allowance ...................................................... (2,268) (153)
Net deferred tax assets ................................................ 657 2,003
Deferred tax liabilities:
Trade names/Intangibles ............................................... 1,097 1,117
Property and equipment ............................................... 166 257
Inventory ........................................................... 378 376
Other .............................................................. 104 77
Total deferred tax liabilities ................................................ 1,745 1,827
Net deferred tax asset (liability) ............................................. $(1,088) $ 176
We account for income taxes in accordance with accounting standards for such taxes, which requires that
deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences
between the financial reporting and tax bases of recorded assets and liabilities. Accounting standards also require
that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion of or
all of the deferred tax asset will not be realized.
Management assesses the available positive and negative evidence to estimate if sufficient future taxable
income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence
evaluated was the cumulative loss incurred over the three-year period ended January 28, 2012. Such objective
evidence limits the ability to consider other subjective evidence such as our projections for future growth.
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