Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income Taxes

Income from continuing operations before income tax

  Income from continuing operations before income tax and the provision for income tax consist of the following (in millions):

Years ended December 31	2012			2011			2010
Income from continuing operations before income taxes:
U.K.	$	36		$	222		$	147
U.S.		469			301			21
Other		876			861			891
Total	$	1,381		$	1,384		$	1,059
Income tax expense (benefit):
Current:
U.K.	$	(10	)	$	13		$	(9	)
U.S. federal		170			(17	)		16
U.S. state and local		57			35			10
Other		238			204			211
Total current	$	455		$	235		$	228
Deferred:
U.K.	$	46		$	32		$	57
U.S. federal		(83	)		109			47
U.S. state and local		(10	)		14			13
Other		(48	)		(12	)		(45	)
Total deferred	$	(95	)	$	143		$	72
Total income tax expense	$	360		$	378		$	300

Reconciliation of the income tax provisions based on the U.S. statutory corporate tax rate to the provisions reflected in the Consolidated Financial Statements

Years ended December 31	2012			2011			2010
Statutory tax rate		24.0	%		35.0	%		35.0	%
U.S. state income taxes, net of U.S. federal benefit		2.2			2.3			1.1
Taxes on international operations (1)		0.6			(11.5	)		(12.5	)
Nondeductible expenses		2.0			3.5			3.9
Adjustments to prior year tax requirements		0.4			(1.1	)		0.2
Deferred tax adjustments, including statutory rate changes		0.7			0.9			0.7
Adjustments to valuation allowances		(5.6	)		(1.7	)		(0.2	)
Other — net		1.8			(0.1	)		0.2
Effective tax rate		26.1			27.3			28.4

(1)

The Company determines the adjustment for taxes on international operations based on the difference between the statutory tax rate applicable to earnings in each foreign jurisdiction and the enacted rate of 24%, 35% and 35% at December 31, 2012, 2011 and 2010, respectively.

Components of Aon's deferred tax assets and liabilities

 The components of the Company's deferred tax assets and liabilities are as follows (in millions):

As of December 31	2012			2011
Deferred tax assets:
Employee benefit plans	$	917		$	940
Net operating/capital loss and tax credit carryforwards		368			484
Other accrued expenses		47			154
Investment basis differences		13			17
Other		77			100
Total		1,422			1,695
Valuation allowance on deferred tax assets		(154	)		(219	)
Total	$	1,268		$	1,476
Deferred tax liabilities:
Intangibles and property, plant and equipment	$	(1,128	)	$	(1,333	)
Deferred revenue		(30	)		(83	)
Other accrued expenses		(62	)		(121	)
Unrealized investment gains		(5	)		(21	)
Unrealized foreign exchange gains		(8	)		(23	)
Other		(29	)		(40	)
Total	$	(1,262	)	$	(1,621	)
Net deferred tax asset (liability)	$	6		$	(145	)

Deferred income taxes (assets and liabilities netted by jurisdiction) as classified in the Consolidated Statements of Financial Position

Deferred income taxes (assets and liabilities have been netted by jurisdiction) have been classified in the Consolidated Statements of Financial Position as follows (in millions):

As of December 31,	2012			2011
Deferred tax assets — current (1)	$	44		$	19
Deferred tax assets — non-current		285			258
Deferred tax liabilities — current (1)		(17	)		(121	)
Deferred tax liabilities — non-current		(306	)		(301	)
Net deferred tax asset (liability)	$	6		$	(145	)

(1)

Included in Other current assets and Other current liabilities.

Reconciliation of the beginning and ending amount of unrecognized tax benefits

The following is a reconciliation of the Company's beginning and ending amount of uncertain tax positions (in millions):

	2012			2011
Balance at January 1	$	118		$	100
Additions based on tax positions related to the current year		21			8
Additions for tax positions of prior years		45			5
Reductions for tax positions of prior years		(1	)		(16	)
Settlements		(22	)		(15	)
Lapse of statute of limitations		(5	)		(4	)
Acquisitions		—			40
Balance at December 31	$	156		$	118