v2.4.0.6

Income Taxes | 12 Months Ended
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Dec. 31, 2011
Income Taxes |
Income Taxes |
14. Income Taxes Bunge operates globally and is subject to the tax laws and regulations of numerous tax jurisdictions and authorities, as well as tax agreements and treaties among these jurisdictions. Bunge's tax provision is impacted by, among other factors, changes in tax laws, regulations, agreements and treaties, currency exchange rates and Bunge's profitability in each taxing jurisdiction. Bunge records valuation allowances when it is more likely than not that some portion or all of its deferred tax assets might not be realized. The ultimate realization of deferred tax assets depends primarily on Bunge's ability to generate sufficient timely future income of the appropriate character in the appropriate taxing jurisdiction. Bunge has elected to use the U.S. federal income tax rate to reconcile the actual provision for income taxes. The components of income from operations before income tax are as follows:
|  | Year Ended December 31, |
--- | --- | --- | ---
(US$ in millions) |  | 2011 |  | 2010 |  | 2009 |
United States |  | $ | 71 |  | $ | 42 |  | $ | 184 |
Non-United States |  |  | 869 |  |  | 3,008 |  |  | (39 | )
Total |  | $ | 940 |  | $ | 3,050 |  | $ | 145 |
The components of the income tax (expense) benefit are:
|  | Year Ended December 31, |
--- | --- | --- | ---
(US$ in millions) |  | 2011 |  | 2010 |  | 2009 |
Current: |  |  |  |  |  |  |  |  |  |
United States |  | $ | (7 | ) | $ | (33 | ) | $ | (58 | )
Non-United States |  |  | (236 | ) |  | (499 | ) |  | (39 | )
|  |  | (243 | ) |  | (532 | ) |  | (97 | )
Deferred: |  |  |  |  |  |  |  |  |  |
United States |  |  | (29 | ) |  | (12 | ) |  | (13 | )
Non-United States |  |  | 246 |  |  | (148 | ) |  | 217 |
|  |  | 217 |  |  | (160 | ) |  | 204 |
Non-current: |  |  |  |  |  |  |  |  |  |
United States |  |  | (5 | ) |  | (1 | ) |  | (2 | )
Non-United States |  |  | (13 | ) |  | 4 |  |  | 5 |
|  |  | (18 | ) |  | 3 |  |  | 3 |
Total |  | $ | (44 | ) | $ | (689 | ) | $ | 110 |
Reconciliation of the income tax benefit (expense) if computed at the U.S. Federal income tax rate to Bunge's reported income tax benefit (expense) is as follows:
|  | Year Ended December 31, |
--- | --- | --- | ---
(US$ in millions) |  | 2011 |  | 2010 |  | 2009 |
Income from operations before income tax |  | $ | 940 |  | $ | 3,050 |  | $ | 145 |
Income tax rate |  |  | 35 | % |  | 35 | % |  | 35 | %
Income tax expense at the U.S. Federal tax rate |  |  | (329 | ) |  | (1,068 | ) |  | (51 | )
Adjustments to derive effective tax rate: |  |  |  |  |  |  |  |  |  |
Foreign earnings taxed at different statutory rates |  |  | 258 |  |  | 515 |  |  | 163 |
Changes in valuation allowances |  |  | 7 |  |  | (129 | ) |  | (17 | )
Goodwill amortization |  |  | 43 |  |  | 44 |  |  | 31 |
Fiscal incentives (1) |  |  | 46 |  |  | 27 |  |  | 22 |
Foreign exchange on monetary items |  |  | 1 |  |  | (9 | ) |  | (11 | )
Non-deductible expenses |  |  | (3 | ) |  | (68 | ) |  | (35 | )
Uncertain tax positions |  |  | (18 | ) |  | 3 |  |  | 3 |
Other |  |  | (49 | ) |  | (4 | ) |  | 5 |
Income tax benefit (expense) |  | $ | (44 | ) | $ | (689 | ) | $ | 110 |
(1) Fiscal incentives predominantly relate to investment incentives in Brazil that are exempt from Brazilian income tax. The primary components of the deferred tax assets and liabilities and the related valuation allowances are as follows:
|  | December 31, |
--- | --- | --- | ---
(US$ in millions) |  | 2011 |  | 2010 |
Deferred income tax assets: |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 1,020 |  | $ | 1,098 |
Excess of tax basis over financial statement basis of property, plant and equipment and other long-lived assets |  |  | 69 |  |  | 34 |
Accrued retirement costs (pension and postretirement healthcare cost) and other accrued employee compensation |  |  | 61 |  |  | 115 |
Tax credit carryforwards |  |  | 8 |  |  | 12 |
Inventories |  |  | 4 |  |  | — |
Other accruals and reserves not currently deductible for tax purposes |  |  | 541 |  |  | 625 |
Total deferred income tax assets |  |  | 1,703 |  |  | 1,884 |
Less valuation allowances |  |  | (187 | ) |  | (245 | )
Deferred tax income assets, net of valuation allowance |  |  | 1,516 |  |  | 1,639 |
Deferred income tax liabilities: |  |  |  |  |  |  |
Excess of tax basis over financial statement basis of property, plant and equipment and other long-lived assets |  |  | 137 |  |  | 179 |
Undistributed earnings of affiliates not considered permanently reinvested |  |  | 20 |  |  | 30 |
Inventories |  |  | 68 |  |  | 11 |
Other temporary differences |  |  | 61 |  |  | 332 |
Total deferred income tax liabilities |  |  | 286 |  |  | 552 |
Net deferred income tax assets |  | $ | 1,230 |  | $ | 1,087 |
Deferred income tax assets and liabilities are measured using the enacted tax rates expected to apply to the years in which those temporary differences are expected to be recovered or settled. With respect to our unremitted earnings that are not considered to be indefinitely reinvested, we have provided a deferred tax liability totaling $20 million and $30 million as of December 31, 2011 and 2010, respectively. As of December 31, 2010, unremitted earnings considered to be indefinitely reinvested included $6,030 million of earnings that would not generate any income tax (including withholding tax) upon a remittance to the Bermuda parent company. After a review of our position, and given the neutral impact on our tax position, we no longer consider those amounts to be indefinitely reinvested. As of December 31, 2011, we have determined the company has unremitted earnings that are considered to be indefinitely reinvested of approximately $1,015 million and, accordingly, no provision for income taxes has been made. If these earnings were distributed in the form of dividends or otherwise, Bunge would be subject to income taxes either in the form of withholding taxes or income taxes to the recipient; however, it is not practicable to estimate the amount of taxes that would be payable upon remittance of these earnings. At December 31, 2011, Bunge's pretax loss carryforwards totaled $3,561 million, of which $2,430 million have no expiration, including loss carryforwards of $2,119 million in Brazil. While loss carryforwards in Brazil can be carried forward indefinitely, annual utilization is limited to 30% of taxable income calculated on an entity by entity basis as Brazil tax law does not provide for a consolidated return concept. Management expects the Brazil tax loss carryforwards to be utilized at various periods beginning in 2012 through approximately 2031. This estimate is based on Management forecasts and if those forecasts are not met, the utilization period will be longer. This forecasted utilization period reflects the impact of the 30% limitation as well as allowable deductions for goodwill, including that arising from recent acquisitions, and the impact of various federal and state tax incentives. The remaining tax loss carryforwards expire at various periods beginning in 2012 through the year 2027. Income Tax Valuation Allowances—Bunge continually assesses the adequacy of its valuation allowances and recognizes tax benefits only when it is more likely than not that the benefits will be realized. In evaluating its ability to realize its deferred tax assets, Bunge considers all available positive and negative evidence including historical and projected operating results and taxable income, the scheduled reversal of deferred tax liabilities, and ongoing tax planning on a jurisdiction by jurisdiction or entity by entity basis, as appropriate under existing tax laws of its operating jurisdictions. The utilization of deferred tax assets depends on the generation of future taxable income during the periods in which the related temporary differences become deductible. In 2011, income tax expense decreased $11 million for net valuation allowances. Uncertain Tax Liabilities—ASC Topic 740 requires applying a "more likely than not" threshold to the recognition and de-recognition of tax benefits. At December 31, 2011 and 2010, respectively, Bunge had recorded tax liabilities of $109 million and $98 million in other non-current liabilities and $7 million and $4 million in current liabilities in its consolidated balance sheets. During 2011, 2010 and 2009, respectively, Bunge recognized $(3) million, $(2) million and $8 million in interest and penalties in income tax benefit (expense) in the consolidated statements of income. A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:
(US$ in millions) |  | 2011 |  | 2010 |  | 2009 |
--- | --- | --- | --- | --- | --- | --- | ---
Balance at January 1, |  | $ | 102 |  | $ | 111 |  | $ | 138 |
Additions based on tax positions related to the current year |  |  | 13 |  |  | 1 |  |  | 1 |
Additions based on tax positions related to prior years |  |  | 17 |  |  | 7 |  |  | 42 |
Reductions for tax positions of prior years |  |  | — |  |  | — |  |  | — |
Settlement or clarification from tax authorities |  |  | (7 | ) |  | (2 | ) |  | (81 | )
Expiration of statute of limitations |  |  | (3 | ) |  | (7 | ) |  | (3 | )
Sale of Brazilian fertilizer nutrients assets |  |  | — |  |  | (6 | ) |  | — |
Foreign currency translation |  |  | (6 | ) |  | (2 | ) |  | 14 |
Balance at December 31, |  | $ | 116 |  | $ | 102 |  | $ | 111 |
Interest and penalties are included in the balance of uncertain tax positions reported in the above table. Bunge recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statements of income. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheets. Substantially all of the unrecognized tax benefits balance, if recognized, would affect Bunge's effective income tax rate. Bunge believes that it is reasonably possible that approximately $7 million of its unrecognized tax benefits, each of which are individually insignificant, may be recognized by the end of 2012 as a result of a lapse of the statute of limitations or settlement with the tax authorities. The net reduction of $27 million in 2009 includes settlements of $39 million under a Brazilian tax amnesty program, a reversal of $7 million due to a favorable ruling from applicable tax authorities, $14 million of currency translation adjustments and various smaller items totaling $4 million. Bunge, through its subsidiaries, files income tax returns in the United States (federal and various states) and non-United States jurisdictions. The table below reflects the tax years for which Bunge is subject to income tax examinations by tax authorities:
|  | Open Tax Years
--- | --- | ---
North America |  | 1996-2011
South America |  | 2005-2011
Europe |  | 2005-2011
Asia |  | 2002-2011
During 2011, the Brazilian IRS commenced an examination of the income tax returns of one of Bunge's Brazilian subsidiaries for the years 2005-2009 and proposed adjustments totaling approximately $160 million plus applicable interest and penalties. Management, in consultation with external legal advisors, has reviewed and responded to the proposed adjustments and believes that it is more likely than not that it will prevail and therefore, has not recorded an uncertain tax liability. In 2010, the Brazilian IRS had proposed certain significant adjustments to the income tax returns for one of Bunge's Brazilian subsidiaries for the years 2005 to 2007. The proposed adjustments totaled approximately $525 million plus applicable interest and penalties. In late 2011, Bunge received a decision from the Tax Inspector that dismissed approximately $170 million of the Brazilian IRS's case against Bunge. Management is appealing the remainder of the case, and has not changed its position that it is more likely than not that it will prevail and therefore, has not recorded an uncertain tax liability. Bunge paid income taxes, net of refunds received, of $592 million, $398 million, and $205 million during the years ended December 31, 2011, 2010 and 2009, respectively. These net payments include payments of estimated income taxes in accordance with applicable tax laws, primarily in Brazil, requiring such interim estimated payments. For 2011 and 2009, estimated tax payments during those years exceeded the annual amounts ultimately determined to be owed for the full years by $88 million and $168 million, respectively. In accordance with applicable tax laws, these overpayments may be recoverable from future income taxes or non-income taxes payable.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 + Details
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