McKesson 2006 Annual Report Download - page 82

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
The reconciliation between the Company’s effective tax rate on income from continuing operations and the statutory tax rate is as follows:
Foreign pre-tax earnings were $244 million, $235 million and $200 million in 2006, 2005 and 2004. At March 31, 2006, undistributed
earnings of our foreign operations totaling $808 million were considered to be permanently reinvested. No deferred tax liability has been
recognized for the remittance of such earnings to the U.S. since it is our intention to utilize those earnings in the foreign operations as well as to
fund certain research and development activities for an indefinite period of time, or to repatriate such earnings when it is tax efficient to do so.
The determination of the amount of deferred taxes on these earnings is not practicable since the computation would depend on a number of
factors that cannot be known until a decision to repatriate the earnings is made.
Deferred tax balances consisted of the following:
77
Years Ended March 31,
(In millions) 2006 2005 2004
Income tax provision (benefit) at federal statutory rate $405 $(85) $317
State and local income taxes net of federal tax benefit 34 (35) 17
Foreign tax rate differential (74) (72)(63)
Reserve for Securities Litigation charge 3 85
—
Nondeductible/nontaxable items 1 6 (3)
Tax settlements 30 8 7
Other—ne
t
22 8 (12)
Income tax provision (benefit) $421 $(85) $263
March 31,
(In millions) 2006 2005
Assets
Receivable allowances $48 $75
Deferred revenue 290 242
Compensation and benefit-related accruals 127 119
Deferred compensation 62 51
Intangibles 16 44
Investment valuation 13 15
Securities Litigation 16 475
Loss and credit carryforwards 273 52
Other 198 132
Subtotal 1,043 1,205
Less: valuation allowance (3) (4)
Total assets $ 1,040 $ 1,201
Liabilities
Basis differences for inventory valuation and other assets $ (950) $ (767)
Basis difference for fixed assets (44) (53)
Systems development costs (112)(115)
Retirement plans (17) (15)
Other (96)(76)
Total liabilities (1,219) (1,026)
Net deferred tax asset (liability) $ (179) $ 175
Current net deferred tax asset (liability) $ (385) $ 150
Long term net deferred tax asset 206 25
Net deferred tax asset (liability) $ (179) $ 175