Abbott Laboratories 2015 Annual Report Download - page 56

ABBOTT 2015 ANNUAL REPORT
54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax eect of the dierences that give rise to deferred tax
assets and liabilities were as follows:
(inmillions) 2015 2014
Deferred tax assets:
Compensation and employee benefits $÷«992 $«1,239
Other, primarily reserves not currently
deductible, and NOL’s and credit carryforwards 2,618 2,759
Trade receivable reserves 197 146
Inventory reserves 141 152
Deferred intercompany profit 276 330
State income taxes 159 178
Total deferred tax assets 4,383 4,804
Deferred tax liabilities:
Depreciation (118) (93)
Unremitted earnings of foreign subsidiaries (694) (184)
Other, primarily the excess of book basis over
tax basis of intangible assets (1,942) (2,307)
Total deferred tax liabilities (2,754) (2,584)
Total net deferred tax assets $1,629 $«2,220
Abbott has incurred losses in a foreign jurisdiction where realization
of the future economic benefit is so remote that the benefit is not
reflected as a deferred tax asset. Valuation allowances for other
recorded deferred tax assets were not significant.
The following table summarizes the gross amounts of unrecog-
nized tax benefits without regard to reduction in tax liabilities or
additions to deferred tax assets and liabilities if such unrecognized
tax benefits were settled:
(inmillions) 2015 2014
January1 $1,403 $1,965
Increase due to current year tax positions 234 220
Increase due to prior year tax positions 95 153
Decrease due to prior year tax positions (169) (856)
Settlements (125) (79)
December31 $1,438 $1,403
The total amount of unrecognized tax benefits that, if recognized,
would impact the eective tax rate is approximately $1.4billion.
Abbott believes that it is reasonably possible that the recorded
amount of gross unrecognized tax benefits may decrease within a
range of $555million to $655million, including cash adjustments,
within the next twelve months as a result of concluding various
domestic and international tax matters.
Earnings from continuing operations before taxes, and the related
provisions for taxes on earnings from continuing operations, were
as follows:
(inmillions) 2015 2014 2013
Earnings From Continuing
Operations Before Taxes:
Domestic $÷«789 $÷«392 $÷«496
Foreign 2,394 2,126 1,545
Total $3,183 $2,518 $2,041
(inmillions) 2015 2014 2013
Taxes on Earnings (Losses)
From Continuing Operations:
Current:
Domestic $÷64 $÷27 $÷÷«4
Foreign 220 468 482
Total current 284 495 486
Deferred:
Domestic 313 298 (308)
Foreign (20) 4 (125)
Total deferred 293 302 (433)
Total $577 $797 $÷«53
Dierences between the eective income tax rate and the U.S.
statutory tax rate were as follows:
2015 2014 2013
Statutory tax rate on earnings from
continuing operations 35.0% 35.0% 35.0%
Impact of foreign operations (18.2)÷« 0.7÷« (18.5)÷«
Resolution of certain tax positions
pertaining to prior years —÷« (4.2)÷« (11.3)÷«
Eect of retroactive legislation —÷« —÷« (5.0)÷«
State taxes, net of federal benefit 0.3÷« (0.5)÷« 2.1÷«
Federal tax cost on sale of Mylan
N.V. shares 2.2÷« —÷« —÷«
All other, net (1.2)÷« 0.6÷« 0.3÷«
Eective tax rate on earnings from
continuing operations 18.1% 31.6% 2.6%
Impact of foreign operations is primarily derived from opera-
tions in Puerto Rico, Switzerland, Ireland, Singapore, and the
Netherlands. In 2014, this benefit was more than oset by the tax
expense accrued as a result of Abbott’s one-time repatriation of its
current year foreign earnings. The 2015 eective tax rate includes
the impact of the R&D tax credit that was made permanent in the
U.S. by the Protecting Americans from Tax Hikes Act of 2015.