Walgreens 2015 Annual Report Download - page 60

evaluating the tax benefits associated with our various tax filing positions, we record a tax benefit for uncertain
tax positions using the highest cumulative tax benefit that is more likely than not to be realized. Adjustments are
made to our liability for unrecognized tax benefits in the period in which we determine the issue is effectively
settled with the tax authorities, the statute of limitations expires for the return containing the tax position or when
more information becomes available. Our liability for unrecognized tax benefits, including accrued penalties and
interest, is primarily included in other long-term liabilities and current income taxes on our consolidated balance
sheets and in income tax provision in our consolidated statements of earnings.
In determining our provision for income taxes, we use income, permanent differences between book and tax
income, and enacted statutory income tax rates. The provision for income taxes rate also reflects our assessment
of the ultimate outcome of tax audits in addition to any foreign-based income deemed to be taxable in the United
States. Discrete events such as audit settlements or changes in tax laws are recognized in the period in which they
occur. Based on current knowledge, we do not believe there is a reasonable likelihood that there will be a
material change in the estimates or assumptions used to determine the amounts recorded for income taxes.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The following table lists our contractual obligations and commitments at August 31, 2015 (in millions):
Payments Due by Period
Total
Less Than
1 Year 1-3 Years 3-5 Years
Over 5
Years
Operating leases(1) $37,970 $ 3,141 $5,952 $ 5,252 $23,625
Purchase obligations(2): 3,455 2,836 552 66 1
Open inventory purchase orders 2,114 2,108 6 — —
Real estate development 543 325 188 30 —
Other corporate obligations 798 403 358 36 1
Short-term borrowings and long-term debt* 14,444 1,070 754 3,733 8,887
Interest payment on short term borrowings and long-term
debt 6,408 330 643 2,718 2,717
Insurance* 567 157 178 76 156
Retirement benefit obligations 1,400 98 121 180 1,001
Closed location obligations* 446 78 100 63 205
Capital lease obligations*(1) 1,198 69 127 121 881
Finance lease obligations 1,324 18 36 36 1,234
Other liabilities reflected on the balance sheet*(3) 1,266 231 307 206 522
Total $71,933 $10,864 $9,322 $12,517 $39,230
* Recorded on balance sheet.
(1) Amounts for operating leases and capital leases do not include certain operating expenses under these leases
such as common area maintenance, insurance and real estate taxes. These expenses were $437 million for
the fiscal year ended August 31, 2015.
(2) Purchase obligations include agreements to purchase goods or services that are enforceable and legally
binding and that specify all significant terms, including open purchase orders.
(3) Includes $297 million ($73 million in less than 1 year, $149 million in 1-3 years, $75 million in 3-5 years
and none over 5 years) of unrecognized tax benefits recorded under Accounting Standards Codification
Topic 740, Income Taxes.
The information in the foregoing table is presented as of August 31, 2015 and accordingly does not reflect
obligations under agreements we entered into after that date, including the Merger Agreement and the
transactions contemplated thereby described under “Recent Development” above.
-56-