Pepsi 2011 Annual Report Download - page 66

Note 5
Income Taxes
2011 2010 2009
Income before income taxes
U.S. $ 3,964 $ 4,008 $ 4,209
Foreign 4,870 4,224 3,870
$ 8,834 $ 8,232 $ 8,079
Provision for income taxes
Current: U.S. Federal $ 611 $ 932 $ 1,238
Foreign 882 728 473
State 124 137 124
1,617 1,797 1,835
Deferred: U.S. Federal 789 78 223
Foreign (88) 18 21
State 54 1 21
755 97 265
$ 2,372 $ 1,894 $ 2,100
Tax rate reconciliation
U.S. Federal statutory tax rate 35.0% 35.0% 35.0%
State income tax, net of U.S. Federal tax
benet 1.3 1.1 1.2
Lower taxes on foreign results (8.7) (9.4) (7.9)
Acquisitions of PBG and PAS – (3.1) –
Other, net (0.8) (0.6) (2.3)
Annual tax rate 26.8% 23.0% 26.0%
Deferred tax liabilities
Investments in noncontrolled aliates $ 41 $ 74
Debt guarantee of wholly owned
subsidiary 828 828
Property, plant and equipment 2,466 1,984
Intangible assets other than
nondeductible goodwill 4,297 3,726
Other 184 647
Gross deferred tax liabilities 7,816 7,259
Deferred tax assets
Net carryforwards 1,373 1,264
Stock- based compensation 429 455
Retiree medical benets 504 579
Other employee- related benets 695 527
Pension benets 545 291
Deductible state tax and interest
benets 339 320
Long- term debt obligations acquired 223 291
Other 822 904
Gross deferred tax assets 4,930 4,631
Valuation allowances (1,264) (875)
Deferred tax assets, net 3,666 3,756
Net deferred tax liabilities $ 4,150 $ 3,503
2011 2010 2009
Deferred taxes included within:
Assets:
Prepaid expenses and other current
assets $ 845 $ 554
Liabilities:
Deferred income taxes $ 4,995 $ 4,057
Analysis of valuation allowances
Balance, beginning of year $ 875 $ 586 $ 657
Provision/(Benet) 464 75 (78)
Other (deductions)/additions (75) 214 7
Balance, end of year $ 1,264 $ 875 $ 586
For additional unaudited information on our income tax policies,
including our reserves for income taxes, see “Our Critical Accounting
Policies” in Management’s Discussion and Analysis.
Reserves
A number of years may elapse before a particular matter, for which
we have established a reserve, is audited and nally resolved. The
number of years with open tax audits varies depending on the tax
jurisdiction. Our major taxing jurisdictions and the related open
taxaudits are as follows:
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nancial instruments was completed for the 1998–2002 audit
cycle. We are currently awaiting a decision by the judge. We
continue to dispute with the IRS Appeals Division three matters
related to the 2003–2005 audit cycle. During 2011, all but three
issues, which are currently under review by the IRS Appeals
Division, were resolved for tax years 2006–2007. We are currently
under audit for tax years 2008–2009;
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through 2005. We are currently under audit for 2006;
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years through 2007;
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for all taxable years through 2007. International audits have been
completed for all taxable years through 2005; and
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years through 2008.
While it is often dicult to predict the nal outcome or the
timing of resolution of any particular tax matter, we believe that our
reserves reect the probable outcome of known tax contingencies.
We adjust these reserves, as well as the related interest, in light of
changing facts and circumstances. Settlement of any particular issue
would usually require the use of cash. Favorable resolution would
be recognized as a reduction to our annual tax rate in the year
ofresolution. For further unaudited information on the impact of
the resolution of open tax issues, see “Other Consolidated Results.”
in Management’s Discussion and Analysis.
As of December31, 2011, the total gross amount of reserves for
income taxes, reported in other liabilities, was $2,167million. Any
prospective adjustments to these reserves will be recorded as an
PepsiCo, Inc.  Annual Report
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Notes to Consolidated Financial Statements