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Tax Matters | 9 Months Ended
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Oct. 01, 2017
Income Tax Disclosure [Abstract] |
Tax Matters | Tax Matters A. Taxes on Income from Continuing Operations Our effective tax rate for continuing operations was 20.3% for the third quarter of 2017, compared to 15.5% for the third quarter of 2016 and was 20.1% for the first nine months of 2017, compared to 14.6% for the first nine months of 2016. The higher effective tax rate for the third quarter of 2017 in comparison with the same period in 2016 was primarily due to:
• | an unfavorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business,
partially offset by:
• | the non-recurrence of the unfavorable tax effects of an impairment charge related to the write-down of the HIS net assets to fair value less estimated costs to sell, mainly related to goodwill, which is not deductible for tax purposes, and the jurisdictional mix of intangible assets.
The higher effective tax rate for the first nine months of 2017 in comparison with the same period in 2016 was primarily due to:
• | the non-recurrence of benefits related to the final resolution of an agreement in principle reached in February 2016 and finalized in April 2016 to resolve certain claims related to Protonix, which resulted in the receipt of information that raised our initial assessment in 2015 of the likelihood of prevailing on the technical merits of our tax position;
• | the non-recurrence of benefits associated with our Venezuela operations; as well as
• | a decrease in benefits associated with the resolution of certain tax positions pertaining to prior years primarily with various foreign tax authorities, and the expiration of certain statutes of limitations,
partially offset by:
• | the change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business; as well as
• | the non-recurrence of the unfavorable tax effects of an impairment charge related to the write-down of HIS net assets to fair value less estimated costs to sell, mainly related to goodwill, which is not deductible for tax purposes, and the jurisdictional mix of intangible assets.
B. Tax Contingencies We are subject to income tax in many jurisdictions, and a certain degree of estimation is required in recording the assets and liabilities related to income taxes. All of our tax positions are subject to audit by the local taxing authorities in each tax jurisdiction. These tax audits can involve complex issues, interpretations and judgments and the resolution of matters may span multiple years, particularly if subject to negotiation or litigation. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution. The U.S. is one of our major tax jurisdictions, and we are regularly audited by the IRS:
• | With respect to Pfizer, the IRS has issued a Revenue Agent’s Report (RAR) for tax years 2009-2010. We are not in agreement with the RAR and are currently appealing certain disputed issues. Tax years 2011-2013 are currently under audit. Tax years 2014-2017 are open, but not under audit. All other tax years are closed.
• | With respect to Hospira, the federal income tax audit for tax years 2012-2013 was effectively settled in the third quarter of 2017. The IRS is currently auditing tax year 2014 through short-year 2015. All other tax years are closed. The tax years under audit for Hospira are not considered material to Pfizer.
• | With respect to Anacor and Medivation, the open tax years are not considered material to Pfizer.
In addition to the open audit years in the U.S., we have open audit years in other major tax jurisdictions, such as Canada (2010-2017), Japan (2015-2017), Europe (2011-2017, primarily reflecting Ireland, the United Kingdom, France, Italy, Spain and Germany), Latin America (1998-2017, primarily reflecting Brazil) and Puerto Rico (2010-2017). C. Tax Provision/(Benefit) on Other Comprehensive Income
The following table provides the components of Tax provision/(benefit) on other comprehensive income:
|  | Three Months Ended |  | Nine Months Ended
(MILLIONS OF DOLLARS) |  | October 1, 2017 |  |  | October 2, 2016 |  |  | October 1, 2017 |  |  | October 2, 2016 |
Foreign currency translation adjustments, net(a) |  | $ | (62 | ) |  | $ | — |  |  | $ | (192 | ) |  | $ | (15 | )
Unrealized holding losses on derivative financial instruments, net |  | 28 |  |  | — |  |  | 30 |  |  | (192 | )
Reclassification adjustments for realized (gains)/losses |  | (29 | ) |  | 32 |  |  | (169 | ) |  | 81 |
|  | (1 | ) |  | 32 |  |  | (139 | ) |  | (112 | )
Unrealized holding gains on available-for-sale securities, net |  | 37 |  |  | 40 |  |  | 93 |  |  | 106 |
Reclassification adjustments for realized gains |  | (49 | ) |  | (14 | ) |  | (45 | ) |  | (16 | )
|  | (12 | ) |  | 26 |  |  | 47 |  |  | 90 |
Benefit plans: actuarial losses, net |  | (37 | ) |  | (31 | ) |  | (15 | ) |  | (39 | )
Reclassification adjustments related to amortization |  | 60 |  |  | 47 |  |  | 152 |  |  | 140 |
Reclassification adjustments related to settlements, net |  | 22 |  |  | 10 |  |  | 30 |  |  | 27 |
Other |  | (33 | ) |  | 14 |  |  | (46 | ) |  | 5 |
|  | 11 |  |  | 40 |  |  | 121 |  |  | 133 |
Benefit plans: prior service (costs)/credits and other, net |  | — |  |  | 35 |  |  | — |  |  | 66 |
Reclassification adjustments related to amortization |  | (17 | ) |  | (17 | ) |  | (50 | ) |  | (47 | )
Reclassification adjustments related to curtailments, net |  | (1 | ) |  | (3 | ) |  | (5 | ) |  | (5 | )
Other |  | 1 |  |  | 2 |  |  | 1 |  |  | 1 |
|  | (17 | ) |  | 18 |  |  | (55 | ) |  | 15 |
Tax provision/(benefit) on other comprehensive income |  | $ | (80 | ) |  | $ | 116 |  |  | $ | (218 | ) |  | $ | 111 |
(a) Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that will be held indefinitely.

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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 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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