Alcoa 2013 Annual Report Download - page 158

For all periods presented, a portion of the balance at end of year pertains to state tax liabilities, which are presented
before any offset for federal tax benefits. The effect of unrecognized tax benefits, if recorded, that would impact the
annual effective tax rate for 2013, 2012, and 2011 would be approximately (1)%, 6%, and 2%, respectively, of pretax
book (loss) income. Alcoa does not anticipate that changes in its unrecognized tax benefits will have a material impact
on the Statement of Consolidated Operations during 2014 (see Other Matters in Note N for a matter for which no
reserve has been recognized).
It is Alcoa’s policy to recognize interest and penalties related to income taxes as a component of the Provision for
income taxes on the accompanying Statement of Consolidated Operations. In 2013, 2012, and 2011, Alcoa recognized
$2, $3, and $2, respectively, in interest and penalties. Due to the expiration of the statute of limitations, settlements
with tax authorities, and refunded overpayments, Alcoa also recognized interest income of $12, $7, and $2 in 2013,
2012, and 2011, respectively. As of December 31, 2013 and 2012, the amount accrued for the payment of interest and
penalties was $11 and $15, respectively.
U. Receivables
Sale of Receivables Programs
In March 2012, Alcoa entered into an arrangement with a financial institution to sell certain customer receivables
without recourse on a revolving basis. The sale of such receivables is completed through the use of a bankruptcy
remote special purpose entity, which is a consolidated subsidiary of Alcoa. This arrangement originally provided for
minimum funding of $50 up to a maximum of $250 for receivables sold. In May 2013, the arrangement was amended
to increase the maximum funding to $500 and include two additional financial institutions. On March 30, 2012, Alcoa
initially sold $304 of customer receivables in exchange for $50 in cash and $254 of deferred purchase price under this
arrangement. Alcoa received additional net cash funding of $5 ($388 in draws and $383 in repayments) and $155 ($160
in draws and $5 in repayments) in 2013 and 2012, respectively. As of December 31, 2013 and 2012, the deferred
purchase price receivable was $248 and $18, respectively, which was included in Other receivables on the
accompanying Consolidated Balance Sheet. The deferred purchase price receivable is reduced as collections of the
underlying receivables occur; however, as this is a revolving program, the sale of new receivables will result in an
increase in the deferred purchase price receivable. The net change in the deferred purchase price receivable was
reflected in the (Increase) decrease in receivables line item on the accompanying Statement of Consolidated Cash
Flows. This activity is reflected as an operating cash flow because the related customer receivables are the result of an
operating activity with an insignificant, short-term interest rate risk. In 2013 and 2012, the gross cash outflows and
inflows associated with the deferred purchase price receivable were $6,985 and $6,755, respectively, and $3,339 and
$3,321, respectively. The gross amount of receivables sold and total cash collected under this program since its
inception was $10,324 and $9,866, respectively. Alcoa services the customer receivables for the financial institutions at
market rates; therefore, no servicing asset or liability was recorded.
Alcoa had three other arrangements, each with a different financial institution, to sell certain customer receivables
outright without recourse on a continuous basis. On March 22, 2013, Alcoa terminated these arrangements. All
receivables sold under these arrangements were collected as of March 31, 2013. Alcoa serviced the customer
receivables for the financial institutions at market rates; therefore, no servicing asset or liability was recorded.
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