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Income Taxes | 9 Months Ended
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Sep. 29, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES The worldwide effective income tax rates for the fiscal nine months of 2019 and 2018 were 15.3% an d 17.6%, respectively. During the third fiscal quarter of 2019, the Company recorded a tax benefit from the enactment of Swiss tax reform which reduced the effective rate for the fiscal nine months of 2019 by 3.0%. This benefit was partially offset by the Company increasing its unrecognized tax benefit liability in the current quarter which increased the effective tax rate for the fiscal nine months of 2019 by approximately 2.0%. Additionally, the Company had less income in higher tax jurisdictions relative to lower tax jurisdictions as compared to the same period in 2018. This was primarily driven by the impact of the agreement in principle to settle opioid litigation (see Note 11 to the Consolidated Financial Statements), in the fiscal third quarter of 2019, which was recorded in the U.S., at an effective tax rate of 23%. As of September 29, 2019, the Company had approximately $3.6 billion of liabilities from unrecognized tax benefits. The Company believes it is possible that tax audits may be completed over the next twelve months by taxing authorities in some jurisdictions outside of the United States. The Company is not able to provide a reasonably reliable estimate of the timing of any future tax payments relating to these uncertain tax positions. With respect to the United States, the IRS has completed its audit for the tax years through 2009 and is currently auditing the tax years 2010 through 2012. The Company has reassessed its uncertain tax positions based on the best information available and therefore in the fiscal third quarter of 2019 has increased its unrecognized tax benefit liability by approximately $0.2 billion. The Company currently expects substantial completion of the audit and settlement of the related tax liabilities in the next nine months. The completion of this tax audit may result in additional adjustments to the Company’s unrecognized tax benefit liability that may have a material impact on the Company’s future operating results or cash flows in the period that the audit is substantially completed. Swiss Tax Reform On September 28, 2018 the Swiss Parliament approved the Federal Act on Tax Reform and AHV Financing (TRAF). On May 19, 2019 a public referendum was held in Switzerland that approved the federal reform proposals. In the fiscal third quarter of 2019, the Swiss Federal Council enacted TRAF. TRAF will become effective on January 1, 2020. The Federal transitional provisions of TRAF allow companies, under certain conditions, to adjust their tax basis adjustments to fair value (i.e., “step-up”) which is used for tax depreciation and amortization purposes resulting in a deduction over the transitional period. The adjustment to the Company’s asset tax basis will require review and approval by the tax authorities. TRAF also provides for parameters which enable the Swiss cantons to establish localized tax rates and regulations for companies. The new cantonal tax parameters include favorable tax benefits for patents and an additional research and development tax deduction. The cantonal transitional provisions of TRAF are also expected to allow companies to elect either 1) tax basis step-up similar to the Federal transition benefit or 2) alternative statutory tax rate for a period not to exceed 5 years. The Company currently has operations located in various Swiss cantons and enactment may not be uniform in both the substantive nature of the legislation and the timing of enactment. The cantons are expected to implement new local legislation by January 1, 2020 or the new federal law will be directly applied. The Company recorded a net tax benefit of $0.4 billion related to this federal and certain cantonal enactments in the fiscal third quarter of 2019 consisting of the following provisions:
• | approximately $360 million tax expense relating to the remeasurement of Swiss deferred tax assets and liabilities for the change in Federal and cantonal tax rates, where enactment occurred by September 29, 2019.
• | a $1.2 billion deferred tax asset related to the estimated value of a Federal tax basis step-up of the Company’s Swiss subsidiaries’ assets.
• | approximately $450 million deferred tax expense relating to U.S. deferred tax liabilities relating to the Global Intangible Low-Taxed Income (GILTI) tax resulting from the remeasurement of the Swiss deferred tax assets and liabilities and the new deferred tax asset for the Federal step-up. See the 2018 Form 10-K for more discussion on the Company’s policy election to account for GILTI under the deferred method.
As of September 29, 2019, two cantons in which the Company operates have enacted legislation in response to the TRAF. The Company is currently assessing the elective cantonal transition provisions including discussions with local taxing authorities on the application of the new law. The Company has recorded an estimated impact of the transitional provisions based on the best available information for cantons where enactment has occurred. The estimated cantonal benefit that has been recorded is not material to the results of the Company. The amounts recorded in the current fiscal quarter do not include the impact of cantonal law changes including the transitional provisions which have not yet been enacted. These enactments, which are expected to occur in the fiscal fourth quarter of 2019 or early 2020, may result in a material impact to the future results of the Company.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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