John Deere 2011 Annual Report Download - page 36

amount of cash and cash equivalents and marketable securities
held by these foreign subsidiaries was $720 million.
Deferred income taxes arise because there are certain
items that are treated differently for financial accounting than
for income tax reporting purposes. An analysis of the deferred
income tax assets and liabilities at October 31 in millions of
dollars follows:
2011 2010
______________ _______________
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
Other postretirement
benefit liabilities ....................... $ 1,944 $ 1,762
Accrual for sales allowances ......... 438 361
Pension liabilities - net .................. 279 199
Accrual for employee benefits ....... 189 175
Inventory ...................................... 152 89
Tax over book depreciation ............ $ 492 $ 521
Tax loss and tax credit
carryforwards .......................... 121 141
Lease transactions ....................... 309 225
Allowance for credit losses ............ 115 137
Goodwill and other
intangible assets ...................... 123 117
Share-based compensation .......... 113 101
Deferred gains on distributed
foreign earnings ....................... 83 78
Deferred compensation ................. 37 35
Undistributed foreign earnings ....... 19 18
Other items .................................. 348 112 328 128
Less valuation allowances ............. (74) (64)
Deferred income tax
assets and liabilities ............ $ 3,745 $ 1,055 $ 3,342 $ 1,009
Deere & Company files a consolidated federal income tax
return in the U.S., which includes the wholly-owned financial
services subsidiaries. These subsidiaries account for income taxes
generally as if they filed separate income tax returns.
At October 31, 2011, certain tax loss and tax credit
carryforwards of $121 million were available with $103 million
expiring from 2012 through 2031 and $18 million with an
unlimited expiration date.
The Patient Protection and Affordable Care Act as
amended by the Healthcare and Education Reconciliation Act
of 2010 was signed into law in the company’s second fiscal
quarter of 2010. Under the legislation, to the extent the
company’s future health care drug expenses are reimbursed
under the Medicare Part D retiree drug subsidy program,
the expenses will no longer be tax deductible effective
November 1, 2013. Since the tax effects for the retiree health
care liabilities were reflected in the company’s financial
statements, the entire impact of this tax change relating to the
future retiree drug costs was recorded in tax expense in the
second quarter of 2010, which was the period in which the
legislation was enacted. As a result of the legislation, the
company’s tax expenses increased approximately $130 million
in 2010.
8. INCOME TAXES
The provision for income taxes by taxing jurisdiction and
by sig nificant component consisted of the following in millions
of dollars:
2011 2010 2009
Current:
U.S.:
Federal ....................................................... $ 928 $ 574 $ 3
State .......................................................... 144 50 12
Foreign ........................................................... 520 363 273
Total current ........................................... 1,592 987 288
Deferred:
U.S.:
Federal ....................................................... (135) 156 246
State .......................................................... (28) 11 10
Foreign ........................................................... (5) 8 (84)
Total deferred ......................................... (168) 175 172
Provision for income taxes ............................. $ 1,424 $ 1,162 $ 460
Based upon location of the company’s operations, the
consolidated income before income taxes in the U.S. in 2011,
2010 and 2009 was $2,618 million, $2,048 million and $756
million, respectively, and in foreign countries was $1,605 million,
$977 million and $583 million, respectively. Certain foreign
operations are branches of Deere & Company and are, there-
fore, subject to U.S. as well as foreign income tax regulations.
The pretax income by location and the preceding analysis of the
income tax provision by taxing jurisdiction are, therefore, not
directly related.
A comparison of the statutory and effective income tax
provision and reasons for related differences in millions of
dollars follow:
2011 2010 2009
U.S. federal income tax provision
at a statutory rate of 35 percent ................ $ 1,478 $ 1,059 $ 469
Increase (decrease) resulting from:
Nondeductible health care claims* ........................ 123
Nondeductible goodwill impairment charge ........... 7 86
State and local income taxes, net of
federal income tax benefit ............................... 75 40 14
Wind energy production tax credits ...................... (30) (26)
Research and development tax credits ................. (38) (5) (25)
Tax rates on foreign activities ............................... (70) (59) (27)
Other-net ............................................................ (21) 27 (31)
Provision for income taxes ............................. $ 1,424 $ 1,162 $ 4 60
* Cumulative adjustment from change in law. Effect included in state taxes was
$7 million.
At October 31, 2011, accumulated earnings in certain
subsidiaries outside the U.S. totaled $2,597 million for which
no provision for U.S. income taxes or foreign withholding taxes
has been made, because it is expected that such earnings will be
reinvested outside the U.S. indefinitely. Determination of the
amount of unrecognized deferred tax liability on these unremit-
ted earnings is not practicable. At October 31, 2011, the
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