John Deere 2009 Annual Report Download - page 35

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A reconciliation of the total amounts of unrecognized tax
benefi ts at October 31 in millions of dollars is as follows:
2009 2008
Beginning of year balance ....................................... $ 23 6 $ 218
Increases to tax positions taken during
the current year ....................................................... 29 23
Increases to tax positions taken during prior years ........ 12 31
Decreases to tax positions taken during prior years ....... (28) (20)
Decreases due to lapse of statute of limitations ............. (3) (3)
Set t lements ................................................................. ( 5)
Acquisi tions ................................................................. 2
Foreign exchange ........................................................ 19 (15)
_______ _______
End of year balance ................................................. $ 260 $ 236
_______ _______
_______ _______
The amount of unrecognized tax benefi ts at October 31,
2009 that would affect the effective tax rate if the tax benefi ts
were recognized was $73 million. The remaining liability was
related to tax positions for which there are offsetting tax
receivables, or the uncertainty was only related to timing.
Based on worldwide tax audits which are scheduled to close over
the next twelve months, the company expects to have decreases
of approximately $130 million and increases of approximately
$50 million to uncertain tax benefi ts primarily related to transfer
pricing. These changes in unrecognized tax benefi ts are not
expected to have a material impact on the effective tax rate due
to compensating adjustments to related tax receivables.
The company fi les its tax returns according to the tax laws
of the jurisdictions in which it operates, which includes the U.S.
federal jurisdictions, and various state and foreign jurisdictions.
The U.S. Internal Revenue Service has completed the exami-
nation of the company’s federal income tax returns for periods
prior to 2001, and for the years 2002 through 2006. The year
2001, 2007 and 2008 federal income tax returns are either
currently under examination or remain subject to examination.
Various state and foreign income tax returns, including major
tax jurisdictions in Canada and Germany, also remain subject to
examination by taxing authorities.
The company’s continuing policy is to recognize interest
related to income taxes in interest expense and interest income,
and recognize penalties in selling, administrative and general
expenses. During 2009 and 2008, the total amount of expense
from interest and penalties was $4 million and $23 million and
the interest income was $3 million and $2 million, respectively.
At October 31, 2009 and 2008, the liability for accrued interest
and penalties totaled $47 million and $45 million and the
receivable for interest was $4 million and $5 million, respectively.
9. OTHER INCOME AND OTHER OPERATING EXPENSES
The major components of other income and other operating
expenses consisted of the following in millions of dollars:
2009 2008 2007
Other income
Revenues from services ............................. $ 418 $ 421 $ 314
Investment income .................................... 9 21 83
Securitization and servicing fee income ...... 3 6 23
Other ........................................................ 84 118 118
______ ______ ______
Total ..................................................... $ 514 $ 566 $ 538
______ ______ ______
______ ______ ______
Other operating expenses
Depreciation of equipment on
operating leases .................................... $ 288 $ 308 $ 297
Cost of services ......................................... 357 295 248
Other ........................................................ 72 96 20
______ ______ ______
Total ..................................................... $ 717 $ 699 $ 565
______ ______ ______
______ ______ ______
10. UNCONSOLIDATED AFFILIATED COMPANIES
Unconsolidated affi liated companies are companies in which
Deere & Company generally owns 20 percent to 50 percent
of the outstanding voting shares. Deere & Company does not
control these companies and accounts for its investments in
them on the equity basis. The investments in these companies
primarily consist of Deere-Hitachi Construction Machinery
Corporation (50 percent ownership), Xuzhou XCG John Deere
Machinery Manufacturing Co., Ltd. (50 percent ownership),
Bell Equipment Limited (32 percent ownership) and A&I
Products (36 percent ownership). The unconsolidated affi liated
companies primarily manufacture or market equipment.
Deere & Company’s share of the income or loss of these
companies is reported in the consolidated income statement
under “Equity in income (loss) of unconsolidated affi liates.”
The investment in these companies is reported in the consoli-
dated balance sheet under “Investments in Unconsolidated
Affi liates.”
Combined fi nancial information of the unconsolidated
affi liated companies in millions of dollars is as follows:
Operations 2009 2008 2007
Sales ........................................................ $ 1,404 $ 2,214 $ 2,026
Net income (loss) ...................................... (23) 99 79
Deere & Company’s equity in
net income (loss) ................................... (6) 40 29
Financial Position 2009 2008
Total assets ............................................................. $ 1,157 $ 1,382
Total external borrowings ......................................... 264 260
Total net assets ....................................................... 515 545
Deere & Company’s share of
the net assets ..................................................... 213 224
Consolidated retained earnings at October 31, 2009
include undistributed earnings of the unconsolidated affi liates
of $81 million. Dividends from unconsolidated affi liates were
$.4 million in 2009, $20 million in 2008 and $13 million in 2007.