Walgreens 2014 Annual Report Download - page 84

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The deferred tax assets and liabilities included in the Consolidated Balance Sheets consist of the following (in
millions):
2014 2013
Deferred tax assets –
Postretirement benefits $ 247 $ 218
Compensation and benefits 166 136
Insurance 98 121
Accrued rent 166 157
Tax benefits 430 159
Stock compensation 131 159
Other 140 96
Subtotal 1,378 1,046
Less: Valuation allowance 223 19
Total deferred tax assets 1,155 1,027
Deferred tax liabilities –
Accelerated depreciation 1,244 1,369
Inventory 407 396
Intangible assets 64 53
Equity method investment 355 21
Deferred income 208 4
Subtotal 2,278 1,843
Net deferred tax liabilities $1,123 $ 816
At August 31, 2014, the Company has recorded deferred tax assets of $430 million, primarily reflecting the benefit
of $1.0 billion in federal and $713 million in state ordinary and capital losses. These deferred tax assets will expire
at various dates from 2015 through 2033, with the majority of the federal losses expiring in 2019 and 2020.
The Company believes it is more likely than not that the benefit from certain net operating and capital loss
carryforwards will not be realized. In recognition of this risk, the Company has recorded a valuation allowance of
$223 million on certain deferred tax assets relating to these loss carryforwards as of August 31, 2014.
Income taxes paid were $1.2 billion for fiscal years 2014, 2013 and 2012.
ASC Topic 740, Income Taxes, provides guidance regarding the recognition, measurement, presentation and
disclosure in the financial statements of tax positions taken or expected to be taken on a tax return, including the
decision whether to file in a particular jurisdiction. As of August 31, 2014, all unrecognized tax benefits were
reported as long-term liabilities on the Consolidated Balance Sheet. As of August 31, 2013, $32 million of
unrecognized tax benefits were reported as current income tax liabilities, with the balance classified as long-term
liabilities on the Consolidated Balance Sheet.
The following table provides a reconciliation of the total amounts of unrecognized tax benefits (in millions):
2014 2013 2012
Balance at beginning of year $208 $197 $ 94
Gross increases related to tax positions in a prior period 55 18 100
Gross decreases related to tax positions in a prior period (82) (32) (49)
Gross increases related to tax positions in the current period 46 30 53
Settlements with taxing authorities (22) (2) (1)
Lapse of statute of limitations (12) (3) —
Balance at end of year $193 $208 $197
76