Tyson Foods 2012 Annual Report Download - page 52

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The tax effects of major items recorded as deferred tax assets and liabilities are as follows:
in millions
2012 2011
Deferred Tax Deferred Tax
Assets Liabilities Assets Liabilities
Property, plant and equipment $ — $ 542 $ — $ 401
Suspended taxes from conversion to accrual method — 76 — 81
Intangible assets — 35 — 35
Inventory 9 105 9 113
Accrued expenses 193 — 196 —
Net operating loss and other carryforwards 101 — 97 —
Insurance reserves 21 — 23 —
Other 69 90 80 68
$ 393 $ 848 $ 405 $ 698
Valuation allowance $(78) $ (92)
Net deferred tax liability $ 533 $ 385
We record deferred tax amounts in Other current assets and in Deferred Income Taxes on the Consolidated Balance Sheets.
The deferred tax liability for property, plant and equipment increased significantly in fiscal 2012 due primarily to increased capital
expenditures along with bonus depreciation for federal income tax purposes. The deferred tax liability for suspended taxes from
conversion to accrual method represents the 1987 change from the cash to accrual method of accounting and will be recognized by
2027.
At September 29, 2012, our gross state tax net operating loss carryforwards approximated $580 million and expire in fiscal years 2013
through 2032. Gross foreign net operating loss carryforwards approximated $215 million, of which $112 million expire in fiscal years
2013 through 2022, and the remainder has no expiration. We also have tax credit carryforwards of approximately $22 million that
expire in fiscal years 2013 through 2026.
We have accumulated undistributed earnings of foreign subsidiaries aggregating approximately $230 million and $339 million at
September 29, 2012, and October 1, 2011, respectively. These earnings are expected to be indefinitely reinvested outside of the United
States. If those earnings were distributed in the form of dividends or otherwise, we would be subject to federal income taxes (subject
to an adjustment for foreign tax credits), state income taxes and withholding taxes payable to the various foreign countries. It is not
currently practicable to estimate the tax liability that might be payable on the repatriation of these foreign earnings.
The following table summarizes the activity related to our gross unrecognized tax benefits at September 29, 2012, October 1, 2011,
and October 2, 2010:
in millions
2012 2011 2010
Balance as of the beginning of the year $ 174 $ 184 $ 233
Increases related to current year tax positions 3 4 4
Increases related to prior year tax positions 5 21 11
Reductions related to prior year tax positions (10)(24) (35)
Reductions related to settlements (1)(9) (25)
Reductions related to expirations of statute of limitations (3)(2) (4)
Balance as of the end of the year $ 168 $ 174 $ 184
The amount of unrecognized tax benefits, if recognized, that would impact our effective tax rate was $154 million and $155 million at
September 29, 2012, and October 1, 2011, respectively. We classify interest and penalties on unrecognized tax benefits as income tax
expense. At September 29, 2012, and October 1, 2011, before tax benefits, we had $64 million and $58 million, respectively, of
accrued interest and penalties on unrecognized tax benefits.