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2015 Annual Report | 51
income taxes in income tax expense. Total interest and penalties recognized were $(4), $3 and $(6) in 2015, 2014
and 2013, respectively. As of September 30, 2015 and 2014, total accrued interest and penalties were $20 and
$25, respectively.
The U.S. is the major jurisdiction for which the Company files income tax returns. Examinations by the U.S. Internal
Revenue Service are substantially complete through 2011. The status of state and non-U.S. tax examinations varies
due to the numerous legal entities and jurisdictions in which the Company operates.
The principal items that gave rise to deferred income tax assets and liabilities follow:
2014 2015
Deferred tax assets:
Net operating losses and tax credits $ 238 207
Accrued liabilities 311 270
Postretirement and postemployment benefits 93 86
Employee compensation and benefits 196 180
Pensions 28 194
Other 137 173
Total $ 1,003 1,110
Valuation allowances $ (154) (160)
Deferred tax liabilities:
Intangibles $ (649) (648)
Property, plant and equipment (258) (260)
Other (98) (51)
Total $(1,005) (959)
Net deferred income tax liability $ (156) (9)
Current deferred tax assets, net were $353 and $354 as of September 30, 2015 and 2014, respectively, and
noncurrent deferred tax liabilities, net were $362 and $510. Total income taxes paid were approximately $1,590,
$1,310 and $1,270 in 2015, 2014 and 2013, respectively. Approximately half of the $207 of net operating losses
and tax credits can be carried forward indefinitely, while the remainder expire over varying periods.
(14) Stock-Based Compensation
The Company’s stock-based compensation plans include stock options, performance shares, restricted stock and
restricted stock units. Although the Company has discretion, shares distributed under these plans are issued from
treasury stock.
STOCK OPTIONS
The Company’s stock option plans permit key officers and employees to purchase common stock at specified prices,
which are equal to 100 percent of the closing market price of the Company’s stock on the date of grant. Options
generally vest one-third in each of the three years subsequent to grant and expire 10 years from the date of grant.
Compensation expense is recognized ratably over the vesting period based on the number of options expected to
vest. As of September 30, 2015, 13.5 million options were available for grant under the plans.
Changes in shares subject to options during the year ended September 30, 2015 follow:
WEIGHTED-AVERAGE TOTAL AVERAGE
EXERCISE PRICE INTRINSIC VALUE REMAINING
(SHARES IN THOUSANDS) PER SHARE SHARES OF AWARDS LIFE (YEARS)
Beginning of year $54.19 13,908
Options granted $60.16 1,378
Options exercised $41.85 (1,016)
Options canceled $61.02 (624)
End of year $55.40 13,646 $15 5.8
Exercisable at year end $51.68 9,147 $15 4.6