US Bank 2007 Annual Report Download - page 101

Effective January 1, 2007, the Company adopted the provisions of FIN 48. The adoption of FIN 48 did not result in a
cumulative-effect accounting adjustment for the Company. The Company classifies interest and penalties related to unrecognized
tax positions as a component of income tax expense. At January 1, 2007, the Company’s total amount of unrecognized tax
positions were $364 million, of which $237 million related to unrecognized tax positions that if recognized, would affect the
effective tax rate. In addition, the amount accrued for the payment of interest on unrecognized tax positions was $22 million.
A reconciliation of the change in the federal, state and foreign unrecognized tax positions balance from January 1, 2007 to
December 31, 2007 follows:
(Dollars in Millions)
Balance at January 1, 2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $364
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Exam resolutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (49)
Statute expirations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40)
Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $296
The total amount of unrecognized tax positions that, if
recognized would impact the effective income tax rate as of
December 31, 2007, was $192 million. During the year ended
December 31, 2007, the Company recognized approximately
$13 million in interest and had approximately $35 million
accrued for the payment of interest at December 31, 2007.
The Company completed its analysis of uncertain tax
positions as of December 31, 2007. While certain
examinations may be concluded, statutes may lapse or other
developments may occur. The Company does not believe
that a significant increase or decrease in the uncertain tax
positions will occur over the next twelve months.
Deferred income tax assets and liabilities reflect the tax
effect of estimated temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for the same items
for income tax reporting purposes.
The significant components of the Company’s net deferred tax liability as of December 31 were:
(Dollars in Millions) 2007 2006
Deferred Tax Assets
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... $ 879 $ 871
Securities available-for-sale and financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 538 278
Stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 255
Other investment basis differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 184 95
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 111 135
Accrued severance, pension and retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 67 68
Federal, state and foreign net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 66 66
Other deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 10
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 2,102 1,778
Deferred Tax Liabilities
Leasing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... (2,139) (2,327)
Pension and postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... (392) (167)
Mortgage servicing rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... (390) (290)
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... (80) (48)
Deferred fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... (59) (81)
Intangible asset basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... (20) (29)
Accelerated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) (13)
Other deferred tax liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (226) (240)
Gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... (3,315) (3,195)
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... (66) (66)
Net Deferred Tax Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,279) $(1,483)
The Company has established a valuation allowance to
offset deferred tax assets related to federal, state and foreign
net operating loss carryforwards which are subject to
various limitations under the respective income tax laws and
some of which may expire unused. The Company has
approximately $413 million of federal, state and foreign net
operating loss carryforwards which expire at various times
through 2024.
Certain events covered by Internal Revenue Code
section 593(e), which was not repealed, will trigger a
U.S. BANCORP 99