Johnson Controls 2011 Annual Report Download - page 94

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94
Company reviewed its equity investment in U.S. Air for impairment and as a result, recorded a $152 million
impairment charge within equity income (loss) for the building efficiency other segment in the first quarter of fiscal
2009. The U.S. Air investment balance included in the consolidated statement of financial position at September 30,
2011 was $53 million. The Company does not anticipate future impairment of this investment as, based on its
current forecasts, a further decline in value that is other than temporary is not considered reasonably likely to occur.
17. INCOME TAXES
The more significant components of the Company’s income tax provision from continuing operations are as follows
(in millions):
Year Ended September 30,
2011
2010
2009
Tax expense (benefit) at federal statutory rate
$
739
$
617
$
(111)
State income taxes, net of federal benefit
(10)
28
(15)
Foreign income tax expense at different rates and
foreign losses without tax benefits
(351)
(330)
(92)
U.S. tax on foreign income
28
(3)
81
Reserve and valuation allowance adjustments
(30)
(138)
180
Medicare Part D
-
16
-
Credits
(7)
(3)
(11)
Other
1
10
-
Provision for income taxes
$
370
$
197
$
32
The effective rate is below the U.S. statutory rate due to continuing global tax planning initiatives, income in certain
non-U.S. jurisdictions with a rate of tax lower than the U.S. statutory tax rate and certain discrete period items.
Valuation Allowances
The Company reviews its deferred tax asset valuation allowances on a quarterly basis, or whenever events or
changes in circumstances indicate that a review is required. In determining the requirement for a valuation
allowance, the historical and projected financial results of the legal entity or consolidated group recording the net
deferred tax asset are considered, along with any other positive or negative evidence. Since future financial results
may differ from previous estimates, periodic adjustments to the Company's valuation allowances may be necessary.
In fiscal 2011, the Company recorded a decrease to its valuation allowances primarily due to a $30 million discrete
period income tax adjustment in the fourth quarter. In the fourth quarter of fiscal 2011, the Company performed an
analysis related to the realizability of its worldwide deferred tax assets. As a result, and after considering tax
planning initiatives and other positive and negative evidence, the Company determined that it was more likely than
not that the deferred tax assets primarily within Denmark, Italy, automotive experience in Korea and automotive
experience in the United Kingdom would be utilized. Therefore, the Company released a net $30 million of
valuation allowances in the three month period ended September 30, 2011.
In fiscal 2010, the Company recorded an overall decrease to its valuation allowances of $87 million primarily due to
a $111 million discrete period income tax adjustment. In the fourth quarter of fiscal 2010, the Company performed
an analysis related to the realizability of its worldwide deferred tax assets. As a result, and after considering tax
planning initiatives and other positive and negative evidence, the Company determined that it was more likely than
not that the deferred tax assets primarily within Mexico would be utilized. Therefore, the Company released $39
million of valuation allowances in the three month period ended September 30, 2010. Further, the Company
determined that it was more likely than not that the deferred tax assets would not be utilized in selected entities in
Europe. Therefore, the Company recorded $14 million of valuation allowances in the three month period ended
September 30, 2010. To the extent the Company improves its underlying operating results in these entities, these
valuation allowances, or a portion thereof, could be reversed in future periods.
In the third quarter of fiscal 2010, the Company determined that it was more likely than not that a portion of the
deferred tax assets within the Slovakia automotive entity would be utilized. Therefore, the Company released $13
million of valuation allowances in the three month period ended June 30, 2010.