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Income taxes | 9 Months Ended
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Sep. 30, 2018
Income Tax Disclosure [Abstract] |
Income taxes | Income taxes The effective tax rates for the three and nine months ended September 30, 2018, were 11.2% and 12.1%, respectively, compared with 15.1% and 15.4%, respectively, for the corresponding periods of the prior year. The decrease in our effective tax rate for the three and nine months ended September 30, 2018, was due primarily to the impacts of U.S. corporate tax reform. On December 22, 2017, the United States enacted the 2017 Tax Act, which imposes a repatriation tax on accumulated earnings of foreign subsidiaries, implements a hybrid territorial tax system together with a current tax on certain foreign earnings and lowers the general corporate income tax rate to 21%. In March 2018, the FASB issued a new accounting standard to incorporate SAB 118, which permits us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. We continue to analyze the 2017 Tax Act and in certain areas have made reasonable estimates of the effects on our condensed consolidated financial statements and tax disclosures. The 2017 Tax Act includes U.S. taxation on certain foreign earnings, referred to as Global Intangible Low-Taxed Income (foreign intangible income), effective January 1, 2018. The FASB allows an entity to make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as foreign intangible income in future years or provide for the tax expense related to the foreign intangible income as a period expense in the year it is incurred. We have recorded no provisional amount for deferred taxes on foreign intangible income because more time is needed to analyze the data in order to make an accounting policy election. We consider our key estimates on the repatriation tax, the net deferred tax remeasurement, the impact on our unrealized tax benefits and the accounting policy election on temporary basis differences related to foreign intangible income to be incomplete due to our continuing analysis of final year-end data and tax positions. We are still accumulating and processing data to update our underlying calculations, and we expect the U.S. Treasury and regulators may issue further guidance, among other things; therefore, our estimates may change during 2018. However, we expect to complete our analysis within the measurement period. The U.S. territory of Puerto Rico imposes an excise tax on the gross intercompany purchase price of goods and services from our manufacturer in Puerto Rico. The rate of 4% is effective through December 31, 2027. We account for the excise tax as a manufacturing cost that is capitalized in inventory and expensed in cost of sales when the related products are sold. For U.S. income tax purposes, the excise tax results in foreign tax credits that are generally recognized in our provision for income taxes when the excise tax is incurred. One or more of our legal entities file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and certain foreign jurisdictions. Our income tax returns are routinely audited by the tax authorities in those jurisdictions. Significant disputes may arise with authorities involving issues of the timing and amount of deductions, the use of tax credits and allocations of income and expenses among various tax jurisdictions because of differing interpretations of tax laws, regulations and the interpretation of the relevant facts. As previously disclosed, we received a Revenue Agent Report (RAR) from the Internal Revenue Service (IRS) for the years 2010, 2011 and 2012. The RAR proposes to make significant adjustments that relate primarily to the allocation of profits between certain of our entities in the United States and the U.S. territory of Puerto Rico. On November 29, 2017, we received a modified RAR that revised the IRS calculations but continued to propose substantial adjustments. We disagree with the proposed adjustments and are pursuing resolution through the IRS administrative appeals process, which we believe will likely not be concluded within the next 12 months. Final resolution of the IRS audit could have a material impact on our results of operations and cash flows if not resolved favorably, however, we believe our income tax reserves are appropriately provided for all open tax years. We are no longer subject to U.S. federal income tax examinations for years ended on or before December 31, 2009. We are currently under examination by a number of other state and foreign tax jurisdictions. During the three and nine months ended September 30, 2018, the gross amounts of our unrecognized tax benefits (UTBs) increased $70 million and $225 million, respectively, as a result of tax positions taken during the current year. The UTB balance decreased by approximately $50 million during the third quarter of 2018 due to a state tax audit settlement. Substantially all of the UTBs as of September 30, 2018, if recognized, would affect our effective tax rate.

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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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