UPS 2005 Annual Report Download - page 93

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Deferred tax liabilities and assets are comprised of the following at December 31 (in millions):
2005 2004
Property, plant and equipment ......................................... $2,572 $2,624
Goodwill and intangible assets ......................................... 491 428
Pensionplans....................................................... 1,722 1,481
Other ............................................................. 396 167
Gross deferred tax liabilities ........................................... 5,181 4,700
Other postretirement benefits .......................................... 681 684
Loss and credit carryforwards (non-U.S. and state) ......................... 113 135
Insurance reserves ................................................... 543 469
Vacation pay accrual ................................................. 154 145
Other ............................................................. 794 471
Gross deferred tax assets .............................................. 2,285 1,904
Deferred tax assets valuation allowance .................................. (54) (86)
Net deferred tax assets ................................................ 2,231 1,818
Net deferred tax liability .............................................. 2,950 2,882
Current deferred tax asset ............................................. (475) (392)
Long-term liability—see Note 9 ........................................ $3,425 $3,274
The valuation allowance increased (decreased) by $(32), $(31), and $25 million during the years ended
December 31, 2005, 2004 and 2003, respectively.
As of December 31, 2005, we have U.S. state & local operating loss and credit carryforwards of
approximately $1.060 billion and $40 million, respectively. The operating loss carryforwards expire at varying
dates through 2025. The majority of the credit carryforwards may be carried forward indefinitely. We also have
non-U.S. loss carryforwards of approximately $644 million as of December 31, 2005, the majority of which may
be carried forward indefinitely. As indicated in the table above, we have established a valuation allowance for
certain non-U.S. and state loss carryforwards, due to the uncertainty resulting from a lack of previous taxable
income within the applicable tax jurisdictions.
Undistributed earnings of our non-U.S. subsidiaries amounted to approximately $1.062 billion at
December 31, 2005. Those earnings are considered to be indefinitely reinvested and, accordingly, no U.S. federal
or state deferred income taxes have been provided thereon. Upon distribution of those earnings in the form of
dividends or otherwise, we would be subject to U.S. income taxes and withholding taxes payable in various
non-U.S. jurisdictions, which could potentially be offset by foreign tax credits. Determination of the amount of
unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with its
hypothetical calculation.
The American Jobs Creation Act of 2004, which provided for a temporary 85% dividends received
deduction on certain foreign earnings repatriated during a one-year period (expired in December 2005), did not
have an impact on UPS as we did not repatriate any earnings subject to the Act.
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