Johnson Controls 2015 Annual Report Download - page 103
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103
In the first quarter of fiscal 2014, the Company determined that it was more likely than not that the deferred tax asset associated
with a capital loss in Mexico would not be utilized. Therefore, the Company recorded a $21 million valuation allowance as income
tax expense.
In the fourth quarter of fiscal 2013, the Company determined that it was more likely than not that deferred tax assets within Germany
and Poland would not be realized. The Company also determined that it was more likely than not that the deferred tax assets within
two French Power Solutions entities would be realized. Therefore, the Company recorded $145 million of net valuation allowances
as income tax expense in the three month period ended September 30, 2013.
In the second quarter of fiscal 2013, the Company determined that it was more likely than not that a portion of the deferred tax
assets within Brazil and Germany would not be realized. Therefore, the Company recorded $94 million of valuation allowances
as income tax expense.
Uncertain Tax Positions
The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. Judgment is required in determining its
worldwide provision for income taxes and recording the related assets and liabilities. In the ordinary course of the Company’s
business, there are many transactions and calculations where the ultimate tax determination is uncertain. The Company is regularly
under audit by tax authorities.
At September 30, 2015, the Company had gross tax effected unrecognized tax benefits of $1,235 million of which $1,180 million,
if recognized, would impact the effective tax rate. Total net accrued interest at September 30, 2015 was approximately $41 million
(net of tax benefit).
At September 30, 2014, the Company had gross tax effected unrecognized tax benefits of $1,655 million of which $1,505 million,
if recognized, would impact the effective tax rate. Total net accrued interest at September 30, 2014 was approximately $106 million
(net of tax benefit).
At September 30, 2013, the Company had gross tax effected unrecognized tax benefits of $1,345 million of which $1,198 million,
if recognized, would impact the effective tax rate. Total net accrued interest at September 30, 2013 was approximately $84 million
(net of tax benefit).
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
Year Ended September 30,
2015 2014 2013
Beginning balance, September 30 $ 1,655 $ 1,345 $ 1,465
Additions for tax positions related to the current year 363 329 123
Additions for tax positions of prior years 23 31 84
Reductions for tax positions of prior years (124)(36)(43)
Settlements with taxing authorities (541)(9)(160)
Statute closings (18)(5)(45)
Audit resolutions (123) — (79)
Ending balance, September 30 $ 1,235 $ 1,655 $ 1,345