United Technologies 2012 Annual Report Download - page 79

Notes to Consolidated Financial Statements 2012 ANNUAL REPORT 77
Changes in non-controlling interests that do not result in a
change of control, and where there is a difference between fair
value and carrying value, are accounted for as equity transactions.
A summary of these changes in ownership interests in subsidiaries
and the pro-forma effect on Net income attributable to common
shareowners had they been recorded through net income is pro-
vided below:
(DOLLARS IN MILLIONS) 2012 2011 2010
Net income attributable to common
shareowners $ 5,130 $ 4,979 $ 4,373
Transfers to non-controlling interests:
Increase in common stock for sale of
subsidiary shares –3–
Decrease in common stock for purchase of
subsidiary shares (34) (54) (12)
Net income attributable to common
shareowners after transfers to non-controlling
interests $ 5,096 $ 4,928 $ 4,361
NOTE 11: INCOME TAXES
The income tax expense (benefit) for the years ended
December 31, consisted of the following components:
(DOLLARS IN MILLIONS) 2012 2011 2010
Current:
United States:
Federal $ 403 $ 382 $ 48
State 996 117
Foreign 1,179 1,322 1,135
1,591 1,800 1,300
Future:
United States:
Federal 335 526 467
State 111 26 4
Foreign (326) (218) (46)
120 334 425
Income tax expense $ 1,711 $ 2,134 $ 1,725
Attributable to items credited to equity
and goodwill $ 297 $ 864 $ 276
Future income taxes represent the tax effects of trans-
actions, which are reported in different periods for tax and financial
reporting purposes. These amounts consist of the tax effects of
temporary differences between the tax and financial reporting bal-
ance sheets and tax carryforwards. Current and non-current future
income tax benefits and payables within the same tax jurisdiction
are generally offset for presentation in the Consolidated Balance
Sheet.
During 2012, UTC completed the Goodrich acquisition. The
accounting for the current and non-current future income tax bene-
fits and payables was materially impacted by the acquisition, result-
ing in a shift of the classification of the tax effects of certain
temporary differences from non-current income tax benefits to non-
current future income taxes payable.
The tax effects of net temporary differences and tax carry-
forwards which gave rise to future income tax benefits and pay-
ables at December 31, 2012 and 2011 are as follows:
(DOLLARS IN MILLIONS) 2012 2011
Future income tax benefits:
Insurance and employee benefits $ 1,168 $ 2,579
Other asset basis differences 119 (569)
Other liability basis differences 1,052 1,046
Tax loss carryforwards 382 723
Tax credit carryforwards 1,107 1,247
Valuation allowances (618) (977)
$ 3,210 $ 4,049
Future income taxes payable:
Insurance and employee benefits $ (2,238) $ 163
Other asset basis differences 4,440 681
Other items, net (195) 71
Tax loss carryforwards (409) –
Tax credit carryforwards (80) –
Valuation allowances 286 –
$ 1,804 $ 915
The future income taxes payable balances of $1,804 million
and $915 million, reflected in the table above, for the years ended
December 31, 2012 and 2011, respectively, are reported in
accrued liabilities and other long-term liabilities on the balance
sheet.
Valuation allowances have been established primarily for
tax credit carryforwards, tax loss carryforwards, and certain foreign
temporary differences to reduce the future income tax benefits to
expected realizable amounts.
During 2012, approximately $225 million of valuation allow-
ances were released as a result of internal legal entity reorganiza-
tions. These internal reorganizations were a component of our
ongoing efforts to improve business efficiency. These valuation
allowance releases are included in the effective tax rate reconcilia-
tion table within the tax on international activities component.
The sources of income before income taxes are:
(DOLLARS IN MILLIONS) 2012 2011 2010
United States $ 2,595 $ 3,168 $ 2,441
Foreign 4,316 4,182 3,807
$ 6,911 $ 7,350 $ 6,248
With few exceptions, U.S. income taxes have not been
provided on undistributed earnings of UTC’s international sub-
sidiaries. These earnings relate to ongoing operations and were
approximately $22 billion as of December 31, 2012. It is not practi-
cable to estimate the amount of tax that might be payable. Our