Alcoa 2014 Annual Report Download - page 165

Alcoa and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign
jurisdictions. With a few minor exceptions, Alcoa is no longer subject to income tax examinations by tax authorities for
years prior to 2004. All U.S. tax years prior to 2014 have been audited by the Internal Revenue Service. Various state
and foreign jurisdiction tax authorities are in the process of examining Alcoa’s income tax returns for various tax years
through 2013.
A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties)
was as follows:
December 31, 2014 2013 2012
Balance at beginning of year $ 63 $66 $ 51
Additions for tax positions of the current year 2 2 -
Additions for tax positions of prior years 5 11 39
Reductions for tax positions of prior years (4) (2) (7)
Settlements with tax authorities (29) (8) (18)
Expiration of the statute of limitations - (2) -
Foreign currency translation (2) (4) 1
Balance at end of year $ 35 $63 $ 66
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 2014, 2013, and 2012 would be approximately 4%, (1)%, and 6%, respectively, of pretax
book income (loss). Alcoa does not anticipate that changes in its unrecognized tax benefits will have a material impact
on the Statement of Consolidated Operations during 2015 (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 2014, 2013, and 2012, Alcoa recognized
$1, $2, and $3, 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 $5, $12, and $7 in 2014,
2013, and 2012, respectively. As of December 31, 2014 and 2013, the amount accrued for the payment of interest and
penalties was $9 and $11, respectively.
U. Receivables
Sale of Receivables Programs
Alcoa has an arrangement with three financial institutions 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 minimum
and maximum funding to $200 and $500, respectively, 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 has received additional net cash funding of $200 ($1,258 in draws and $1,058 in
repayments) since the program’s inception, including $40 ($710 in draws and $670 in repayments) and $5 ($388 in
draws and $383 in repayments) in 2014 and 2013, respectively.
As of December 31, 2014 and 2013, the deferred purchase price receivable was $356 and $248, 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.
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