McKesson 2011 Annual Report Download - page 80

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
74
Significant judgments and estimates are required in determining the consolidated income tax provision.
Although our major taxing jurisdictions are the U.S. and Canada, we are subject to income taxes in numerous
foreign jurisdictions. Annually, we file a federal consolidated income tax return with the IRS and over 1,200 returns
with various state and foreign jurisdictions. Our income tax expense, deferred tax assets and liabilities reflect
management’s best assessment of estimated current and future taxes to be paid.
The reconciliation between our effective tax rate on income from continuing operations and statutory tax rate is
as follows:
Years Ended March 31,
(In millions)
2011
2010
2009
Income tax provision at federal statutory rate
$
572
$
652
$
372
State and local income taxes net of federal tax benefit
33
25
18
Foreign income taxed at various rates
(105)
(144)
(120)
Unrecognized tax benefits and settlements
14
53
(21)
Tax credits
(16)
(8)
(20)
Other, net
7
23
12
Income tax provision
$
505
$
601
$
241
At March 31, 2011, undistributed earnings of our foreign operations totaling $2.7 billion were considered to be
permanently reinvested. No deferred tax liability has been recognized on the basis difference created by such
earnings 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. The determination of the amount of deferred taxes on
these earnings is not practicable because 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:
March 31,
(In millions)
2011
2010
Assets
Receivable allowances
$
48
$
56
Deferred revenue
107
107
Compensation and benefit related accruals
409
349
AWP litigation accrual
97
56
Loss and credit carryforwards
494
481
Other
241
235
Subtotal
1,396
1,284
Less: valuation allowance
(99)
(97)
Total assets
$
1,297
$
1,187
Liabilities
Basis difference for inventory valuation and other assets
$
(1,450)
$
(1,363)
Basis difference for fixed assets and systems development costs
(221)
(210)
Intangibles
(532)
(209)
Other
(58)
(63)
Total liabilities
(2,261)
(1,845)
Net deferred tax liability
$
(964)
$
(658)
Current net deferred tax liability
$
(1,036)
$
(975)
Long-term net deferred tax asset
72
317
Net deferred tax liability
$
(964)
$
(658)