Taxation

12 Months Ended

Dec. 31, 2011

Income Tax Disclosure [Abstract]

Income Tax Disclosure

27.       Taxation

The components of pre tax income from continuing operations are as follows:

	2011	2010	2009
Year to December 31,	$’M	$’M	$’M
	___________	___________	___________
Republic of Ireland	(65.9)	(170.0)	(232.3)
UK	45.3	35.4	62.8
US	747.6	745.5	552.2
Other jurisdictions	363.1	158.4	260.3
	___________	___________	___________
	1,090.1	769.3	643.0
	___________	___________	___________

The provision for income taxes by location of the taxing jurisdiction for the years to December 31,2011, 2010 and 2009consisted of the following:

Year to December 31,
	2011	2010	2009
	$’M	$’M	$’M
	__________	__________	__________
Current income taxes:
Republic of Ireland	(1.8)	-	-
US federal tax	193.1	176.4	154.3
US state and local taxes	9.0	6.6	14.4
Other	40.0	25.9	16.8
	__________	__________	__________
Total current taxes	240.3	208.9	185.5
	__________	__________	__________
Deferred taxes:
Republic of Ireland	-	-	(1.0)
US federal tax	22.5	(6.0)	(24.5)
US state and local taxes	(4.6)	(9.8)	(32.2)
UK corporation tax	(1.0)	(0.1)	6.1
Other	(29.6)	(10.3)	4.6
	__________	__________	__________
Total deferred taxes	(12.7)	(26.2)	(47.0)
	__________	__________	__________
Total income taxes(1)	227.6	182.7	138.5
	__________	__________	__________

(1)Total income taxes relate solely to continuing operations as there is no tax provision/(benefit) relating to discontinued operations for the years to December 31, 2011, 2010 or 2009.

The reconciliation of income from continuing operations before income taxes, noncontrolling interests and equity in earnings/(losses) of equity method investees at the statutory tax rate to the provision for income taxes is shown in the table below:

	Year to December 31,
		2011	2010	2009
		$’M	$’M	$’M
		___________	___________	___________
Income from continuing operations before income taxes and equity in earnings/ (losses) of equity method investees		1,090.1	769.3	643.0
		___________	___________	___________
Statutory tax rate(1)		25.0%	25.0%	25.0%
Adjustments to derive effective rate:
Non-deductable items:
	US R&D credit	(4.7%)	(5.7%)	(5.2%)
	Effect of the convertible bond	0.8%	1.8%	2.0%
	Intangible asset amortization(2)	-	-	0.1%
	Intra-group items(3)	(7.7%)	(12.0%)	(11.8%)
	Other permanent items	(0.4%)	0.8%	2.2%
Other items:
Change in valuation allowance		2.1%	5.1%	1.3%
Difference in taxation rates		4.5%	11.0%	8.5%
Change in provisions for uncertain tax positions		(1.3%)	2.2%	2.3%
Prior year adjustment		0.8%	(4.2%)	(2.7%)
Change in tax rates		1.4%	-	1.9%
Other		0.4%	(0.2%)	(2.1%)
		___________	___________	___________
Provision for income taxes on continuing operations		20.9%	23.8%	21.5%
		___________	___________	___________

(1)In addition to being subject to the Irish Corporation tax rate of 25%, in 2011 the Company is also subject to income tax in other territories in which the Company operates, including: Canada (16.5%); France (33.3%); Germany (15%); Italy (27.5%); Luxembourg (21.0%); Malta (35%); the Netherlands (25.5%); Belgium (33.99%); Spain (30%); Sweden (26.3%); Switzerland (8.5%); United Kingdom (26.3%) and the US (35%). The rates quoted represent the headline federal income tax rates in each territory, and do not include any state taxes or equivalents or surtaxes or other taxes charged in individual territories, and do not purport to represent the effective tax rate for the Company in each territory.

(2)The permanent difference results from tax deductible amortization available following inter-company asset transfers for which the recognition of a deferred tax asset is prohibited.

(3)Intra-group items principally relate to the effect of inter-company dividends, capital receipts (either taxable or non-taxable) and other intra-territory eliminations, the pre-tax effect of which has been eliminated in arriving at the Company's consolidated income from continuing operations before income taxes, noncontrolling interests and equity in earnings/(losses) of equity method investees.

(4) Certain of our activities operate under a tax holiday which is effective through December 2021. The impact of the tax holiday is to reduce the effective tax rate by 1.7% during 2011 (2010: increase in the effective tax rate by 0.2%; 2009: nil effect).

Provisions for uncertain tax positions

The Company files income tax returns in the Republic of Ireland, the UK, the US (both federal and state) and various other jurisdictions (see footnote (1) to the table above for major jurisdictions). With few exceptions, the Company is no longer subject to income tax examinations by tax authorities for years before 1999. Tax authorities in various jurisdictions are in the process of auditing the Company's tax returns for fiscal periods from 1999; these tax audits cover a range of issues, including transfer pricing, potential restrictions on the utilization of net operating losses, potential taxation of overseas dividends and controlled foreign companies' rules.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2011	2010	2009
	$’M	$’M	$’M
	___________	___________	___________
Balance at January 1	290.8	254.0	228.7
Increases based on tax positions related to the current year	18.2	12.4	4.2
Decreases based on tax positions taken in the current year	(2.5)	(1.7)	(0.2)
Increases for tax positions taken in prior years	1.4	18.0	25.2
Decreases for tax positions taken in prior years	(12.0)	(3.2)	(19.4)
Decreases resulting from settlements with the taxing authorities	(25.7)	(6.5)	(16.1)
Decreases as a result of expiration of the statute of limitations	(0.5)	-	-
Foreign currency translation adjustments(1)	(4.2)	17.8	31.6
	___________	___________	___________
Balance at December 31(2)	265.5	290.8	254.0
	___________	___________	___________

(1)Recognized within Other Comprehensive Income

(2)The full amount of which would affect the effective rate if recognized

The Company considers it reasonably possible that the total amount of unrecognized tax benefits recorded at December 31, 2011 will not materially decrease in the next twelve months as a result of the conclusion of audits currently being conducted by various tax authorities. While tax audits remain open, the Company also considers it reasonably possible that issues may be raised by tax authorities resulting in increases to the balance of unrecognized tax benefits, however an estimate of such an increase cannot be made.

The Company is required in certain tax jurisdictions to make advance deposits to tax authorities on receipt of a tax assessment. These payments have been offset against the income tax liability within the balance sheet but have not reduced the provision for unrecognized tax benefits.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits within income taxes. During the years ended December 31, 2011, 2010 and 2009, the Company recognized $4.0 million, $1.0 million and $21.3 million in interest and penalties and the Company had a liability of $114.5 million and $110.5 million for the payment of interest and penalties accrued at December 31, 2011 and 2010, respectively.

Deferred taxes

The significant components of deferred tax assets and liabilities and their balance sheet classifications, as at December 31, are as follows:

	December 31,	December 31,
	2011	2010
	$’M	$’M
	____________	____________
Deferred tax assets:
Deferred revenue	6.0	9.2
Inventory & warranty provisions	43.3	33.1
Losses carried forward (including tax credits)	384.8	314.3
Provisions for sales deductions and doubtful accounts	119.5	101.3
Restructuring	0.7	1.1
Intangible assets	44.0	14.7
Share-based compensation	34.8	42.5
Excess of tax value over book value of fixed assets	0.0	24.3
Other	34.1	28.6
	____________	____________
Gross deferred tax assets	667.2	569.1
Less: valuation allowance	(211.8)	(200.0)
	____________	____________
	455.4	369.1
Deferred tax liabilities:
Intangible assets	(691.5)	(433.2)
Excess of book value over tax value of assets	(22.2)	-
	____________	____________
Net deferred tax liabilities	(258.3)	(64.1)
	____________	____________
Balance sheet classifications:
Deferred tax assets - current	207.6	182.0
Deferred tax assets - non-current	50.7	110.4
Deferred tax liabilities - current	-	(4.4)
Deferred tax liabilities - non-current	(516.6)	(352.1)
	____________	____________
	(258.3)	(64.1)
	____________	____________

At December 31, 2011, the Company had a valuation allowance of $211.8 million (2010: $200.0 million) to reduce its deferred tax assets to estimated realizable value. These valuation allowances related primarily to operating loss, capital loss and tax-credit carry-forwards in Ireland (2011: $68.5 million; 2010: $77.2 million); the US (2011: $33.9 million; 2010: $44.5 million); Germany (2011: $80.7 million; 2010: $49.0 million); and other foreign tax jurisdictions (2011: $28.7 million; 2010: $29.3 million).

The net increase in valuation allowances of $11.8 million is principally due to increases of losses and other temporary differences in European jurisdictions, as the Company's management considers that there is insufficient future taxable income, taxable temporary differences and feasible tax-planning strategies to overcome cumulative losses and therefore it is more likely than not that the relevant deferred tax assets will not be realized in full.

At December 31, 2011, based upon a consideration in combination of the profit history of the relevant affiliates, projections of future taxable income over the periods in which temporary differences are anticipated to reverse, any restrictions on uses of loss carryforwards and prudent and feasible tax-planning strategies, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of the valuation allowances. However, the amount of the deferred tax asset considered realizable could be adjusted in the future if these factors are revised in future periods.

The approximate tax effect of NOLs, capital losses and tax credit carry-forwards as at December 31, are as follows:

	2011	2010
	$’M	$’M
	____________	____________
US federal tax NOLs	45.3	14.7
US state tax NOLs	19.8	16.6
UK NOLs	24.8	30.4
Republic of Ireland NOLs	58.0	66.0
Foreign tax jurisdictions	174.7	80.4
R&D tax credits	62.1	106.2
	____________	____________

The approximate gross value of NOLs and capital losses at December 31, 2011 is $1,610.1million (2010: $1,178.3million). The tax effected NOLs, capital losses and tax credit carry-forwards shown above have the following expiration dates:

	December 31,
	2011
	$’M
	___________
Within 1 year	0.1
Within 2 to 3 years	0.8
Within 3 to 4 years	1.1
Within 4 to 5 years	1.8
Within 5 to 6 years	3.3
After 6 years	115.4
Indefinitely	262.2

We do not provide for deferred taxes on the excess of the financial reporting over the tax basis in our investments in foreign subsidiaries that are essentially permanent in duration. At 31 December 2011, that excess totalled $6.2 billion (2010: $5.8 billion). The determination of the additional deferred taxes that have not been provided is not practicable.