Kimberly-Clark 2010 Annual Report Download - page 79

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Presented below is a reconciliation of the income tax provision computed at the U.S. federal statutory tax
rate to the actual effective provision for income taxes:
Year Ended December 31
2010 2009 2008
Tax at U.S. statutory rate applied to income before income taxes .................... 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit .................................... 1.8 (0.3) 0.9
Statutory rates other than U.S. statutory rate ..................................... (3.0) (2.4) (2.4)
Other – net(a) .............................................................. (2.9) (3.3) (6.5)
Effective income tax rate .................................................... 30.9% 29.0% 27.0%
(a) Other—net is comprised of numerous items, none of which is greater than 1.75 percent of income before income taxes.
At December 31, 2010, U.S. income taxes have not been provided on $7.3 billion of unremitted earnings of
subsidiaries operating outside the U.S. These earnings, which are considered to be invested indefinitely, would
become subject to income tax if they were remitted as dividends, were lent to Kimberly-Clark or a U.S. affiliate,
or if Kimberly-Clark were to sell its stock in the subsidiaries. Determination of the amount of unrecognized
deferred U.S. income tax liability on these unremitted earnings is not practicable because of the complexities
associated with this hypothetical calculation.
Accounting for Uncertainty in Income Taxes
Presented below is a reconciliation of the beginning and ending amounts of unrecognized income tax
benefits:
2010 2009 2008
(Millions of dollars)
Balance at January 1 ................................................. $570 $438 $438
Gross increases for tax positions of prior years ............................ 67 139 62
Gross decreases for tax positions of prior years ............................ (89) (77) (96)
Gross increases for tax positions of the current year ........................ 54 113 68
Settlements ........................................................ (36) (39) (15)
Lapse of statute of limitations .......................................... —(10) (6)
Currency .......................................................... 26 (13)
Balance at December 31 .............................................. $568 $570 $438
Of the amounts recorded as unrecognized tax benefits at December 31, 2010, 2009 and 2008, $474 million,
$488 million and $356 million, respectively, would reduce our effective tax rate if recognized.
We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.
During the years ended December 31, 2010, 2009 and 2008, we recognized a net cost of $8 million, a net cost of
$2 million and a net benefit of $8 million, respectively, in interest and penalties. Total accrued penalties and net
accrued interest was $15 million and $18 million at December 31, 2010 and 2009, respectively.
It is reasonably possible that a number of uncertainties could be resolved within the next 12 months. The
most significant uncertainties involve transfer pricing and certain financing structures. Various other uncertain
tax positions also may be resolved. It is reasonably possible the aggregate resolution of the uncertainties could be
up to $100 million, while none of the uncertainties is individually significant. Resolution of these matters is not
expected to have a material effect on our financial condition, results of operations or liquidity.
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