UPS 2010 Annual Report Download - page 114

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In the fourth quarter of 2008, we completed our annual goodwill impairment testing and determined that our
UPS Freight reporting unit, which was formed through the acquisition of Overnite Corporation in 2005, had a
goodwill impairment of $548 million. The impairment was not deductible for tax purposes and therefore
negatively impacted our effective tax rate in 2008.
Deferred tax liabilities and assets are comprised of the following at December 31 (in millions):
2010 2009
Property, plant and equipment ......................................... $3,335 $3,141
Goodwill and intangible assets ......................................... 853 791
Other ............................................................. 562 401
Gross deferred tax liabilities ........................................... 4,750 4,333
Other postretirement benefits .......................................... 1,055 990
Pension plans ....................................................... 809 956
Loss and credit carryforwards (non-U.S. and state) ......................... 295 315
Insurance reserves ................................................... 655 634
Vacation pay accrual ................................................. 191 186
Stock compensation .................................................. 242 244
Other ............................................................. 568 589
Gross deferred tax assets .............................................. 3,815 3,914
Deferred tax assets valuation allowance .................................. (207) (237)
Net deferred tax asset ................................................ 3,608 3,677
Net deferred tax liability .............................................. $1,142 $ 656
Amounts recognized in the balance sheet:
Current deferred tax assets ............................................ $ 659 $ 585
Current deferred tax liabilities (included in other current liabilities) ............ $ 28 $ 2
Non-current deferred tax assets (included in other non-current assets) .......... $ 97 $ 54
Non-current deferred tax liabilities ...................................... $1,870 $1,293
The valuation allowance changed by $30, ($120), and ($61) million during the years ended December 31,
2010, 2009 and 2008, respectively.
We have U.S. state and local operating loss and credit carryforwards as follows (in millions):
2010 2009
U.S. state and local operating loss carryforwards ........................... $1,088 $1,178
U.S. state and local credit carryforwards ................................. $ 74 $ 65
The operating loss carryforwards expire at varying dates through 2030. 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 $908 million as of December 31, 2010, 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.
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