Wells Fargo 2007 Annual Report Download - page 122

119
(in millions, except per share amounts) Year ended December 31,
2007 2006 2005
Net income (numerator) $ 8,057 $ 8,420 $ 7,671
EARNINGS PER COMMON SHARE
Average common shares outstanding (denominator) 3,348.5 3,368.3 3,372.5
Per share $2.41 $ 2.50 $ 2.27
DILUTED EARNINGS PER COMMON SHARE
Average common shares outstanding 3,348.5 3,368.3 3,372.5
Add: Stock options 34.2 41.7 37.8
Restricted share rights 0.1 0.1 0.6
Diluted average common shares outstanding (denominator) 3,382.8 3,410.1 3,410.9
Per share $2.38 $ 2.47 $ 2.25
The table below shows earnings per common share and
diluted earnings per common share and reconciles the
numerator and denominator of both earnings per common
share calculations.
Note 22: Earnings Per Common Share
At December 31, 2007, 2006 and 2005, options to
purchase 13.8 million, 6.7 million and 9.7 million shares,
respectively, were outstanding but not included in the
calculation of diluted earnings per common share because
the exercise price was higher than the market price, and
therefore they were antidilutive.
We adopted FIN 48, Accounting for Uncertainty in
Income Taxes, on January 1, 2007. Implementation of FIN
48 did not result in a cumulative effect adjustment to
retained earnings at the date of adoption.
The change in unrecognized tax benefits in 2007 follows:
the payment of interest, respectively. Interest income of
$34 million was recognized for 2007 as a component of
income tax expense.
We are subject to U.S. federal income tax as well as
income tax in numerous state and foreign jurisdictions.
With few exceptions, we are not subject to federal income
tax examinations for taxable years prior to 2005, foreign
income tax examinations for taxable years prior to 2004,
or state and local income tax examinations prior to 2003.
We are routinely examined by tax authorities in various
jurisdictions. The IRS recently began its examination of our
2005 and 2006 consolidated federal income tax returns. We
are also litigating or appealing various issues related to our
prior IRS examinations for the periods 1997-2004. We have
paid the IRS the contested income tax associated with these
issues and refund claims have been filed for the respective
years. We do not anticipate that the current examination
or the resolution of the contested issues will be completed
in the next 12 months. We are also under examination in
numerous other taxing jurisdictions. While it is possible
that one or more of these examinations may be resolved
within the next 12 months, we do not anticipate that these
examinations will significantly impact our uncertain tax
positions. We are estimating that our unrecognized tax benefits
could decrease by approximately $100 to $200 million
during the next 12 months primarily related to statute
expirations. It is also reasonably possible that the decreases
to our unrecognized tax benefits will be more than offset
by additions related to new matters arising during the
current period.
(in millions)
Balance at January 1, 2007 $2,875
Additions:
For tax positions related
to the current year 203
For tax positions related
to prior years (1) 105
Reductions:
For tax positions related
to prior years (82)
Lapse of statute of limitations (244)
Settlements with tax authorities (162)
Balance at December 31, 2007 $2,695
(1) Prior year additions include $22 million of acquired unrecognized tax benefits.
Of the $2,695 million of unrecognized tax benefits at
December 31, 2007, approximately $1,363 million of the
unrecognized tax benefits would, if recognized, affect the
effective tax rate. Also included in the unrecognized tax
benefits are $22 million of liabilities that, if recognized,
would be recorded as an adjustment to goodwill. The
remaining $1,310 million of unrecognized tax benefits
relates to income tax positions on temporary differences.
We recognize interest and penalties as a component
of income tax expense. At the end of 2007 and 2006 we
accrued approximately $230 million and $262 million for