Banana Republic 2012 Annual Report Download - page 76

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58
The provision for income taxes consists of the following:
Fiscal Year
($ in millions) 2012 2011 2010
Current:
Federal $ 617 $ 419 $ 476
State 56 37 75
Foreign 90 91 134
Total current 763 547 685
Deferred:
Federal (37) 14 94
State (6) (6) (5)
Foreign 6 (19) 4
Total deferred (37) (11) 93
Total provision $ 726 $ 536 $ 778
Except as noted below and where required by U.S. tax law, no provision has been made for U.S. income taxes on the
undistributed earnings of our foreign subsidiaries as we intend to utilize those earnings in our foreign operations for an
indefinite period of time. Such undistributed earnings and profits, as calculated pursuant to provisions in the U.S. Internal
Revenue Code and related Treasury Regulations, of foreign subsidiaries as of February 2, 2013 and January 28, 2012
were approximately $1.7 billion and $1.5 billion, respectively. Cash balances in these foreign subsidiaries are substantially
lower than these earnings and profits. If we had not intended to utilize the undistributed earnings in our foreign operations
for an indefinite period of time, the deferred tax liability as of February 2, 2013 and January 28, 2012 would have been
approximately $237 million and $225 million, respectively.
In fiscal 2012, we assessed the forecasted cash needs and overall financial position of our foreign subsidiaries. As a
result, we determined that approximately $54 million of undistributed earnings was in excess of the amount we expect to
utilize in the operations of our Canadian subsidiaries for an indefinite period of time, and accordingly, we have established
a deferred tax liability for U.S. income taxes with respect to such earnings as of February 2, 2013 and we have recorded
related tax expense of $5 million.
The difference between the effective tax rate and the U.S. federal tax rate is as follows:
Fiscal Year
2012 2011 2010
Federal tax rate 35.0% 35.0% 35.0%
State income taxes, less federal benefit 2.7 2.2 3.5
Tax impact of foreign operations 2.0 2.1 1.3
Other (0.7) (0.1) (0.5)
Effective tax rate 39.0% 39.2% 39.3%
In fiscal 2012, we changed the presentation of our effective tax rate reconciliation to reflect the impact of state and foreign
tax credits and other related items in the corresponding line items in the table. Previously, these items were included in
Other within the table. The reconciliations for fiscal 2011 and 2010 have been conformed to reflect these changes in
presentation.
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