Chevron 2012 Annual Report Download - page 54

52 Chevron Corporation 2012 Annual Report
Note 14 Taxes – Continued
Notes to the Consolidated Financial Statements
Millions of dollars, except per-share amounts
e company’s eective tax rate decreased slightly from
43.3 percent in 2011 to 43.2 percent in 2012. e impact of
lower eective tax rates in international upstream operations
was essentially oset by foreign currency remeasurement
impacts between periods. For international upstream, the
lower eective tax rates in the current period were driven pri-
marily by the eects of asset sales, one-time tax benets and
reduced withholding taxes, which were partially oset by a
lower utilization of tax credits during the current year.
e company records its deferred taxes on a tax-
jurisdiction basis and classies those net amounts as current
or noncurrent based on the balance sheet classication of the
related assets or liabilities. e reported deferred tax balances
are composed of the following:
At December 31
2012 2011
Deferred tax liabilities
Properties, plant and equipment $ 24,295 $ 23,597
Investments and other 2,276 2,271
Total deferred tax liabilities 26,571 25,868
Deferred tax assets
Foreign tax credits (10,817) (8,476)
Abandonment/environmental reserves (5,728) (5,387)
Employee benets (5,100) (4,773)
Deferred credits (2,891) (1,548)
Tax loss carryforwards (738) (828)
Other accrued liabilities (381) (531)
Inventory (281) (360)
Miscellaneous (1,835) (1,595)
Total deferred tax assets (27,771) (23,498)
Deferred tax assets valuation allowance 15,443 11,096
Total deferred taxes, net $ 14,243 $ 13,466
Deferred tax liabilities at the end of 2012 increased by
approximately $700 from year-end 2011. e increase was
related to increased temporary dierences for property, plant
and equipment.
Deferred tax assets increased by approximately $4,300
in 2012. Increases primarily related to additional U.S. foreign
tax credits arising from earnings in high-tax-rate interna-
tional jurisdictions (which were substantially oset by a
valuation allowance) and to future international tax benets
earned.
e overall valuation allowance relates to deferred tax
assets for U.S. foreign tax credit carryforwards, tax loss carry-
forwards and temporary dierences. It reduces the deferred
tax assets to amounts that are, in management’s assessment,
more likely than not to be realized. At the end of 2012, the
company had tax loss carryforwards of approximately $2,009
and tax credit carryforwards of approximately $1,146 primar-
ily related to various international tax jurisdictions. Whereas
some of these tax loss carryforwards do not have an expira-
tion date, others expire at various times from 2013 through
2029. U.S. foreign tax credit carryforwards of $10,817 will
expire between 2013 and 2022.
At December 31, 2012 and 2011, deferred taxes were
classied on the Consolidated Balance Sheet as follows:
At December 31
2012 2011
Prepaid expenses and other current assets $ (1,365) $ (1,149)
Deferred charges and other assets (2,662) (1,224)
Federal and other taxes on income 598 295
Noncurrent deferred income taxes 17,672 15,544
Total deferred income taxes, net $ 14,243 $ 13,466
Income taxes are not accrued for unremitted earnings
of international operations that have been or are intended
to be reinvested indenitely. Undistributed earnings of inter-
national consolidated subsidiaries and affiliates for which
no deferred income tax provision has been made for possible
future remittances totaled $26,527 at December 31, 2012.
is amount represents earnings reinvested as part of the
company’s ongoing international business. It is not practicable
to estimate the amount of taxes that might be payable on
the possible remittance of earnings that are intended to be
reinvested indenitely. At the end of 2012, deferred income
taxes were recorded for the undistributed earnings of certain
international operations where indenite reinvestment of the
earnings is not planned. e company does not anticipate
incurring signicant additional taxes on remittances of earn-
ings that are not indenitely reinvested.
Uncertain Income Tax Positions Under accounting stan-
dards for uncertainty in income taxes (ASC 740-10), a
company recognizes a tax benet in the nancial statements
for an uncertain tax position only if management’s assess-
ment is that the position is “more likely than not” (i.e., a
likelihood greater than 50 percent) to be allowed by the tax
jurisdiction based solely on the technical merits of the posi-
tion. e term “tax position” in the accounting standards for
income taxes refers to a position in a previously led tax
return or a position expected to be taken in a future tax
return that is reected in measuring current or deferred
income tax assets and liabilities for interim or annual periods.
e following table indicates the changes to the compa-
ny’s unrecognized tax benets for the years ended December
31, 2012, 2011 and 2010. e term “unrecognized tax ben-
ets” in the accounting standards for income taxes refers to
the dierences between a tax position taken or expected to be
taken in a tax return and the benet measured and recognized
in the nancial statements. Interest and penalties are not
included.