Provision for Income Taxes

12 Months Ended

Dec. 31, 2011

Income Tax Disclosure [Abstract]

Provision for Income Taxes

PROVISION FOR INCOME TAXES

	2011			2010			2009
Current tax expense (benefit):
U.S. federal	$	397		$	(109	)	$	23
U.S. state and local	(11		)	—			(9		)
International	586			454			328
Total current tax expense	972			345			342
Deferred tax expense (benefit):
U.S. federal	(144		)	245			57
U.S. state and local	(4		)	3			1
International	(52		)	66			15
Total deferred tax (benefit) expense	(200		)	314			73
Provision for income taxes	$	772		$	659		$	415

The significant components of deferred tax assets and liabilities at December 31, 2011 and 2010, are as follows:

	2011					2010
	Asset			Liability		Asset			Liability
Depreciation	$	—		$	1,781	$	—		$	1,614
Accrued employee benefits	5,562			252		3,731			81
Other accrued expenses	1,020			354		928			369
Inventories	199			39		273			154
Unrealized exchange gains/losses	—			35		34			—
Tax loss/tax credit carryforwards/backs	2,854			—		2,680			—
Investment in subsidiaries and affiliates	46			259		41			279
Amortization of intangibles	69			1,399		53			636
Other	250			279		314			144
Valuation allowance	(1,971		)	—		(1,666		)	—
	$	8,029		$	4,398	$	6,388		$	3,277
Net deferred tax asset	$	3,631				$	3,111

An analysis of the company's effective income tax rate (EITR) follows:

	2011		2010		2009
Statutory U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
Exchange gains/losses1	(0.6	)	2.1		(0.7	)
Domestic operations	(3.0	)	(2.6	)	(2.0	)
Lower effective tax rates on international operations-net	(11.2	)	(14.9	)	(13.1	)
Tax settlements	(0.2	)	(1.8	)	(0.2	)
Sale of a business	(2.0	)	—		—
	18.0	%	17.8	%	19.0	%

^1.  Principally reflects the impact of non-taxable exchange gains and losses resulting from remeasurement of foreign currency-denominated monetary assets and liabilities. Further information about the company's foreign currency hedging program is included in Note 19 under the heading Foreign Currency Risk.

Consolidated income before income taxes for U.S. and international operations was as follows:

	2011		2010		2009
U.S. (including exports)	$	860	$	949	$	171
International	3,422		2,762		2,013
	$	4,282	$	3,711	$	2,184

The decrease in U.S. pre-tax earnings from 2010 to 2011 is primarily driven by the results of the company's hedging program. In 2010, the U.S. recorded $117 of exchange gains associated with the hedging program, however, in 2011, the program resulted in the company recording $133 of exchange losses. This swing in the exchange gains and losses year over year offsets underlying recovery in the U.S. economy. While the taxation of the amounts reflected on the chart above does not correspond precisely to the jurisdiction of taxation (due to taxation in multiple countries, exchange gains/losses, etc.), it represents a reasonable approximation of the income before income taxes split between U.S. and international jurisdictions. See Note 19 for additional information regarding the company's hedging program.

Under the tax laws of various jurisdictions in which the company operates, deductions or credits that cannot be fully utilized for tax purposes during the current year may be carried forward or back, subject to statutory limitations, to reduce taxable income or taxes payable in future or prior years. At December 31, 2011, the tax effect of such carryforwards/backs, net of valuation allowance approximated $1,428. Of this amount, $1,204 has no expiration date, $70 expires after 2011 but before the end of 2016 and $154 expires after 2016.

At December 31, 2011, unremitted earnings of subsidiaries outside the U.S. totaling $13,350 were deemed to be indefinitely reinvested. No deferred tax liability has been recognized with regard to the remittance of such earnings. It is not practical to estimate the income tax liability that might be incurred if such earnings were remitted to the U.S.

Each year the company files hundreds of tax returns in the various national, state and local income taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the taxing authorities. Positions challenged by the taxing authorities may be settled or appealed by the company. As a result, there is an uncertainty in income taxes recognized in the company's financial statements in accordance with accounting for income taxes and accounting for uncertainty in income taxes. It is reasonably possible that changes to the company's global unrecognized tax benefits could be significant, however, due to the uncertainty regarding the timing of completion of audits and possible outcomes, a current estimate of the range of increases or decreases that may occur within the next twelve months cannot be made.

The company and/or its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states and non-U.S. jurisdictions. With few exceptions, the company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 1999. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

	2011			2010			2009
Total unrecognized tax benefits as of January 1	$	693		$	739		$	677
Gross amounts of decreases in unrecognized tax benefits as a result of tax positions      taken during the prior period	(82		)	(155		)	(60		)
Gross amounts of increases in unrecognized tax benefits as a result of tax positions      taken during the prior period	170			169			68
Gross amounts of increases in unrecognized tax benefits as a result of tax positions      taken during the current period	79			51			42
Amount of decreases in the unrecognized tax benefits relating to settlements with taxing      authorities	(6		)	(90		)	(9		)
Reduction to unrecognized tax benefits as a result of a lapse of the applicable statue of      limitations	(32		)	(24		)	(10		)
Exchange gain (loss)	(22		)	3			31
Total unrecognized tax benefits as of December 31	$	800		$	693		$	739
Total unrecognized tax benefits that, if recognized, would impact the effective tax rate	$	683		$	545		$	566
Total amount of interest and penalties recognized in the Consolidated Income Statements	$	7		$	(70	)	$	12
Total amount of interest and penalties recognized in the Consolidated Balance Sheets	$	113		$	99		$	125