Equifax 2007 Annual Report Download - page 72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
70 EQUIFAX | 2007 ANNUAL REPORT
Components of the deferred income tax assets and liabilities
at December 31, 2007 and 2006 were as follows:
December 31,
(In millions) 2007 2006
Deferred income tax assets:
Employee pension benefits $ 60.9 $ 68.3
Net operating and capital loss carryforwards 40.2 35.0
Unrealized foreign exchange loss 8.2 26.9
Foreign tax credits 19.5 21.4
Employee compensation programs 25.4 18.8
Reserves and accrued expenses 17.4 14.5
Deferred revenue 7.2 7.4
Other 9.7 0.3
Gross deferred income tax assets 188.5 192.6
Valuation allowance (60.8) (74.8)
Total deferred income tax assets, net $ 127.7 $ 117.8
Deferred income tax liabilities:
Goodwill and intangible assets (305.3) (99.4)
Pension expense (74.4) (75.8)
Undistributed earnings of foreign subsidiaries (5.2) (4.4)
Depreciation (2.7) (1.4)
Other (6.1) (3.4)
Total deferred income tax liability (393.7) (184.4)
Net deferred income tax liability $(266.0) $ (66.6)
Our deferred income tax assets, included in other current assets,
and liabilities at December 31, 2007 and 2006, are included in
the accompanying Consolidated Balance Sheets as follows:
December 31,
(In millions) 2007 2006
Current deferred income tax assets $ 11.1 $ 4.2
Long-term deferred income tax liabilities (277.1) (70.8)
Net deferred income tax liability $(266.0) $(66.6)
We record deferred income taxes on the temporary differences
of our foreign subsidiaries and branches, except for the temporary
differences related to undistributed earnings of subsidiaries which
we consider indefi nitely invested. We have indefi nitely invested
$91.3 million attributable to pre-2004 undistributed earnings of
our Canadian and Chilean subsidiaries. If the pre-2004 earnings
were not considered indefi nitely invested, $7.6 million of deferred
U.S. income taxes would have been provided. Such taxes, if
ultimately paid, may be recoverable as U.S. foreign tax credits.
As of December 31, 2007, we had a deferred tax asset of
$8.2 million related to accumulated foreign currency translation
losses for foreign locations, excluding adjustments for pre-2004
Canadian and Chilean earnings. A full valuation allowance, included
in accumulated other comprehensive loss, has been provided due
to uncertainty of future realization of this deferred tax asset.
At December 31, 2007, we had U.S. federal and state net
operating loss carryforwards of $342.3 million which will expire
at various times between 2012 and 2027. We also had foreign net
operating loss carryforwards totaling $72.6 million of which
$47.9 million will expire between 2012 and 2020 and the remaining
$24.7 million will carryforward indefi nitely. U.S. federal and state
capital loss carryforwards total $1.7 million at December 31, 2007,
all of which will expire by 2011. Foreign capital loss carryforwards
of $26.3 million may be carried forward indefi nitely. Additionally,
we had foreign tax credit carryforwards of $19.5 million, of which
$14.9 million will begin to expire between 2010 and 2015 and
the remaining $4.6 million will be available to be utilized upon
repatriation of foreign earnings. Tax-effected state net operating
loss, capital loss, foreign tax credit carryforwards and other foreign
deferred tax assets of $52.6 million have been fully reserved in
the deferred tax asset valuation allowance.
Cash paid for income taxes, net of amounts refunded,
was $139.9 million, $144.9 million and $108.6 million during
the twelve months ended December 31, 2007, 2006 and
2005, respectively.
Adoption of FIN 48. We adopted FIN 48 on January 1, 2007. The
impact of our reassessment of our tax positions in accordance with
the requirements of FIN 48 was immaterial to our Consolidated
Financial Statements.
We recognize interest and penalties accrued related to
unrecognized tax benefi ts in the provision for income taxes on our
Consolidated Statements of Income. Our classifi cation of interest
and penalties did not change as a result of adopting FIN 48.
A reconciliation of the beginning and ending amount of
unrecognized tax benefi ts is as follows:
(In millions) Total
Balance at January 1, 2007 $26.7
Increases Related to Prior Year Tax Positions 1.5
Decreases Related to Prior Year Tax Positions (0.8)
Increases Related to Current Year Tax Positions 2.3
Decreases Related to Settlements (1.3)
Expiration of the Statute of Limitations
for the Assessment of Taxes (0.6)
Purchase Accounting 0.4
Currency Translation Adjustment 1.2
Balance at December 31, 2007 $29.4
We had a $34.1 million liability recorded for the unrecognized
tax benefi ts as of January 1, 2007, which included interest and
penalties of $7.4 million. As of January 1, 2007, the total amount
of unrecognized benefi ts that, if recognized, would have affected
the effective tax rate was $29.1 million, which included interest
and penalties of $5.4 million. We have a $37.6 million liability
recorded for the unrecognized tax benefi ts as of December 31, 2007,
which includes interest and penalties of $8.2 million. The total
amount of unrecognized benefi ts that, if recognized, would affect
the effective tax rate is $30.0 million, which includes interest and
penalties of $5.6 million. We accrued potential interest and penalties
of $0.2 million related to unrecognized tax benefi ts during 2007.
Equifax and its subsidiaries are subject to U.S federal, state
and international income taxes. We are generally no longer subject
to federal, state, or international income tax examinations by tax
authorities for years before 2002, with few exceptions including
those discussed below for Canada and the U.K. In Canada, we are
under audit by the Canada Revenue Agency for the 1995 through
2002 tax years (see Note 5 of the Notes to Consolidated Financial
Statements). For the U.K., tax years after 1999 are open for
examination. Additionally, the Internal Revenue Service is currently
examining our 2004 U.S. income tax return. Due to the potential