United Airlines 2008 Annual Report Download - page 116

effectively settled amounted to $5 million. Excluding these items and amounts related to tax positions
for which the ultimate deductibility is highly certain, there were no other significant changes in the
components of the liability in the twelve months ending December 31, 2008. Any change in the amount
of unrecognized tax benefits within the next twelve months is not expected to significantly impact the
Company’s results of operations or financial position.
Included in the balance at December 31, 2008, is $4 million of tax positions for which the ultimate
deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of
the shorter deductibility period would not affect the effective tax rate but would cause a reduction to the
net operating losses available for utilization.
The Company records penalties and interest relating to uncertain tax positions in the other
operating expense and interest expense line items, respectively, within our Statements of Consolidated
Operations. There are no significant accrued interest or penalties or interest or penalty expense recorded
in the accompanying consolidated financial statements.
The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits
related to uncertain tax positions:
(In millions) 2008 2007
Balance at January 1, ............................................ $35 $48
Increase in unrecognized tax benefits as a result of tax positions taken
during the current period...................................... 1 1
Decrease in unrecognized tax benefits as a result of tax positions taken
during a prior period ......................................... (11) (14)
Decrease in unrecognized tax benefits relating to settlements with taxing
authorities ................................................. (5) —
Balance at December 31, ......................................... $20 $35
Our income tax returns for tax years after 2003 remain subject to examination by the Internal
Revenue Service and state taxing jurisdictions.
United and its domestic consolidated subsidiaries, file a consolidated federal income tax return with
UAL. Under an intercompany tax allocation policy, United and its subsidiaries compute, record and pay
UAL for their own tax liability as if they were separate companies filing separate returns. In determining
their own tax liabilities, United and each of its subsidiaries take into account all tax credits or benefits
generated and utilized as separate companies and they are compensated for the aforementioned tax
benefits only if they would be able to use those benefits on a separate company basis.
(9) Retirement and Postretirement Plans
The Company maintains various retirement plans, both defined benefit and defined contribution,
which cover substantially all employees. As discussed below, most of the Company’s defined benefit
plans were terminated and replaced with defined contribution plans as part of the bankruptcy
reorganization. The Company also provides certain health care benefits, primarily in the U.S., to retirees
and eligible dependents, as well as certain life insurance benefits to certain retirees reflected as “Other
Benefits” in the tables below. The Company has reserved the right, subject to collective bargaining
agreements, to modify or terminate the health care and life insurance benefits for both current and
future retirees.
The following table sets forth the reconciliation of the beginning and ending balances of the benefit
obligation and plan assets, the funded status and the amounts recognized in the Statements of
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