UPS 2007 Annual Report Download - page 102

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):
2007 2006
Property, plant and equipment ......................................... $2,864 $2,802
Goodwill and intangible assets ......................................... 636 578
Pension plans ....................................................... 693 579
Other ............................................................. 355 343
Gross deferred tax liabilities ........................................... 4,548 4,302
Other postretirement benefits .......................................... 890 789
Loss and credit carryforwards (non-U.S. and state) ......................... 189 130
Insurance reserves ................................................... 606 586
Vacation pay accrual ................................................. 185 171
Other ............................................................. 738 659
Gross deferred tax assets .............................................. 2,608 2,335
Deferred tax assets valuation allowance .................................. (56) (43)
Net deferred tax assets ................................................ 2,552 2,292
Net deferred tax liability .............................................. $1,996 $2,010
Amounts recognized in the balance sheet:
Current deferred tax asset ............................................. $ 605 $ 414
Non-current deferred tax asset ......................................... $ 19 $ 105
Non-current deferred tax liabilities ...................................... $2,620 $2,529
The valuation allowance changed by $(13), $11, and $32 million during the years ended December 31,
2007, 2006 and 2005, respectively.
As of December 31, 2007, we have U.S. state & local operating loss and credit carryforwards of
approximately $1.773 billion and $68 million, respectively. The operating loss carryforwards expire at varying
dates through 2027. The state credits can be carried forward for periods ranging from three years to indefinitely.
We also have non-U.S. loss carryforwards of approximately $793 million as of December 31, 2007, 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 $1.720 billion at
December 31, 2007. 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.
We adopted FIN 48 on January 1, 2007. The cumulative effect of adopting this standard was to recognize a
$104 million decrease in the January 1, 2007 balance of retained earnings.
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