Northrop Grumman 2009 Annual Report Download - page 94

examination of the company’s tax returns for the years 2004 through 2006. It is reasonably possible that the
company will reach a settlement with the IRS and Joint Committee within the next twelve months which may
result in a material net reduction in the company’s liability for uncertain tax positions.
During the year ended December 31, 2009, the company recorded approximately $6 million of interest income,
and during the year ended December 31, 2008, the company recorded $29 million of interest expense within its
federal and foreign income tax provision.
Deferred Income Taxes – Deferred income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and tax purposes. Such amounts are
classified in the consolidated statements of financial position as current or noncurrent assets or liabilities based
upon the classification of the related assets and liabilities.
The tax effects of significant temporary differences and carryforwards that gave rise to year-end deferred federal,
state and foreign tax balances, as presented in the consolidated statements of financial position, are as follows:
$ in millions 2009 2008
December 31
Deferred Tax Assets
Retirement benefit plan expense $2,094 $2,558
Provision for accrued liabilities 718 727
Tax credits and capital loss carryforwards 33
Other 399 377
Gross deferred tax assets 3,211 3,695
Less valuation allowance (33)
Net deferred tax assets 3,211 3,662
Deferred Tax Liabilities
Contract accounting differences 252 307
Purchased intangibles 253 225
Depreciation and amortization 550 478
Goodwill amortization 622 570
Gross deferred tax liabilities 1,677 1,580
Total net deferred tax assets $1,534 $2,082
Net deferred tax assets (liabilities) as presented in the consolidated statements of financial position are as follows:
$ in millions 2009 2008
December 31
Net current deferred tax assets $ 524 $ 585
Net non-current deferred tax assets 1,010 1,497
Total net deferred tax assets $1,534 $2,082
Foreign Income – As of December 31, 2009, the company had approximately $590 million of accumulated
undistributed earnings generated by its foreign subsidiaries. No deferred tax liability has been recorded on these
earnings since the company intends to permanently reinvest these earnings, thereby indefinitely postponing their
remittance. Should these earnings be distributed in the form of dividends or otherwise, the distributions would
be subject to U.S. federal income tax at the statutory rate of 35 percent, less foreign tax credits available to offset
such distributions, if any. In addition, such distributions would be subject to withholding taxes in the various tax
jurisdictions.
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NORTHROP GRUMMAN CORPORATION
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