Emerson 2010 Annual Report Download - page 51

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2010 Annual Report
49
(13) Income Taxes
Pretax earnings from continuing operations consist of the following:
2008 2009 2010
United States $1,756 1,169 1,303
Non-U.S. 1,889 1,281 1,576
Total pretax earnings from continuing operations $3,645 2,450 2,879
The principal components of income tax expense follow:
2008 2009 2010
Current:
Federal $ 531 230
496
State and local 50 25 33
Non-U.S. 488 313 413
Deferred:
Federal 69 149
(55)
State and local (4) 9 (1)
Non-U.S. (9) (38) (38)
Income tax expense $1,125 688 848
Reconciliations of the U.S. federal statutory tax rate to the Company’s effective tax rate follow:
2008 2009 2010
Federal rate 35.0% 35.0% 35.0%
State and local taxes, net of federal tax benefit 0.8 0.9 0.7
Non-U.S. rate differential (3.9) (4.6) (4.5)
Non-U.S. tax holidays (0.9) (2.0) (2.2)
U.S. manufacturing deduction (0.7) (0.8) (0.6)
Other 0.6 (0.4) 1.0
Effective income tax rate 30.9% 28.1% 29.4%
Non-U.S. tax holidays reduce tax rates in certain foreign jurisdictions and are expected to expire over the next five years.
Following are reconciliations of the beginning and ending balances of unrecognized tax benefits before recoverability
of cross-jurisdictional tax credits (federal, state and non-U.S.) and temporary differences. The amount of unrecognized
tax benefits is not expected to significantly increase or decrease within the next 12 months.
2009 2010
Beginning balance, at October 1 $168 159
Additions for current year tax positions 17 48
Additions for prior years tax positions 14 20
Reductions for prior years tax positions (24) (34)
Reductions for settlements with tax authorities (10) (10)
Reductions for expirations of statute of limitations (6) (13)
Ending balance, at September 30 $159 170
If none of the unrecognized tax benefits shown is ultimately paid, the tax provision and the calculation of the effec-
tive tax rate would be favorably impacted by $132. Acquired positions of $27 in 2010 are included in additions for the
current year. The Company accrues interest and penalties related to income taxes in income tax expense. Total interest
and penalties recognized were $(1) and $6 in 2010 and 2009, respectively. As of September 30, 2010 and 2009, total
accrued interest and penalties were $37 and $33, respectively.