XML 1087 R28.htm IDEA: XBRL DOCUMENT
v2.4.0.8

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2013
Income Tax Disclosure [Abstract] |
Income Taxes | T. Income Taxes The components of (loss) income from continuing operations before income taxes were as follows:
|  | 2013 |  |  | 2012 |  |  | 2011 |
U.S. |  | $ | (1,269 | ) |  | $ | 394 |  |  | $ | (98 | )
Foreign |  |  | (547 | ) |  |  | (70 | ) |  |  | 1,161 |
|  | $ | (1,816 | ) |  | $ | 324 |  |  | $ | 1,063 |
The provision for income taxes on income from continuing operations consisted of the following:
|  | 2013 |  |  | 2012 |  |  | 2011 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal* |  | $ | 14 |  |  | $ | 85 |  |  | $ | 10 |
Foreign |  |  | 235 |  |  |  | 167 |  |  |  | 427 |
State and local |  |  | 1 |  |  |  | 9 |  |  |  | (1 | )
|  |  | 250 |  |  |  | 261 |  |  |  | 436 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal* |  |  | 84 |  |  |  | 129 |  |  |  | 28 |
Foreign |  |  | 95 |  |  |  | (227 | ) |  |  | (211 | )
State and local |  |  | (1 | ) |  |  | (1 | ) |  |  | 2 |
|  |  | 178 |  |  |  | (99 | ) |  |  | (181 | )
Total |  | $ | 428 |  |  | $ | 162 |  |  | $ | 255 |
* | Includes U.S. taxes related to foreign income
Included in discontinued operations is a tax benefit of $1 in 2011. The exercise of employee stock options generated a tax charge of $1 in both 2013 and 2012 and a tax benefit of $6 in 2011, representing only the difference between compensation expense recognized for financial reporting and tax purposes. These amounts decreased or increased equity and increased or reduced either current taxes payable or deferred tax assets (not operating losses) in the respective periods. Alcoa has unamortized tax-deductible goodwill of $35 resulting from intercompany stock sales and reorganizations. Alcoa recognizes the tax benefits (generally at a 30% rate) associated with this tax-deductible goodwill as it is being amortized for local income tax purposes rather than in the period in which the transaction is consummated. A reconciliation of the U.S. federal statutory rate to Alcoa’s effective tax rate for continuing operations was as follows (the effective tax rate for 2013 was a provision on a loss and for both 2012 and 2011 was a provision on income):
|  | 2013 |  |  | 2012 |  |  | 2011 |
U.S. federal statutory rate |  |  | 35.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
Taxes on foreign operations |  |  | (0.3 | ) |  |  | (0.1 | ) |  |  | (11.0 | )
Permanent differences on restructuring and other charges and asset disposals |  |  | (0.8 | ) |  |  | 10.8 |  |  |  | - |
Audit and other adjustments to prior years’ accruals |  |  | (0.9 | ) |  |  | 3.5 |  |  |  | (1.1 | )
Noncontrolling interests |  |  | (3.1 | ) |  |  | 3.8 |  |  |  | 0.8 |
Statutory tax rate and law changes |  |  | 0.6 |  |  |  | (0.4 | ) |  |  | 0.8 |
Changes in valuation allowances |  |  | (23.2 | ) |  |  | 15.2 |  |  |  | 2.3 |
Impairment of goodwill |  |  | (33.3 | ) |  |  | - |  |  |  | - |
Amortization of goodwill related to intercompany stock sales/reorganizations |  |  | 1.1 |  |  |  | (7.7 | ) |  |  | (2.8 | )
Change in legal structure of investments |  |  | - |  |  |  | (4.1 | ) |  |  | - |
Interest income related to income tax positions |  |  | - |  |  |  | (1.3 | ) |  |  | (0.2 | )
Company-owned life insurance/split-dollar net premiums |  |  | 1.1 |  |  |  | (3.9 | ) |  |  | (0.2 | )
Other |  |  | 0.2 |  |  |  | (0.8 | ) |  |  | 0.4 |
Effective tax rate |  |  | (23.6 | )% |  |  | 50.0 | % |  |  | 24.0 | %
The components of net deferred tax assets and liabilities were as follows:
|  | 2013 |  |  | 2012 |
December 31, |  | Deferred tax assets |  |  | Deferred tax liabilities |  |  | Deferred tax assets |  |  | Deferred tax liabilities |
Depreciation |  | $ | 185 |  |  | $ | 1,150 |  |  | $ | 104 |  |  | $ | 1,015 |
Employee benefits |  |  | 2,499 |  |  |  | 36 |  |  |  | 2,742 |  |  |  | 46 |
Loss provisions |  |  | 437 |  |  |  | 14 |  |  |  | 368 |  |  |  | 17 |
Deferred income/expense |  |  | 87 |  |  |  | 188 |  |  |  | 53 |  |  |  | 203 |
Tax loss carryforwards |  |  | 2,229 |  |  |  | - |  |  |  | 2,186 |  |  |  | - |
Tax credit carryforwards |  |  | 567 |  |  |  | - |  |  |  | 508 |  |  |  | - |
Derivatives and hedging activities |  |  | 74 |  |  |  | 25 |  |  |  | 117 |  |  |  | 16 |
Other |  |  | 310 |  |  |  | 261 |  |  |  | 324 |  |  |  | 297 |
|  |  | 6,388 |  |  |  | 1,674 |  |  |  | 6,402 |  |  |  | 1,594 |
Valuation allowance |  |  | (1,804 | ) |  |  | - |  |  |  | (1,400 | ) |  |  | - |
|  | $ | 4,584 |  |  | $ | 1,674 |  |  | $ | 5,002 |  |  | $ | 1,594 |
The following table details the expiration periods of the deferred tax assets presented above:
December 31, 2013 |  | Expires within 10 years |  |  | Expires within 11-20 years |  |  | No expiration* |  |  | Other* |  |  | Total |
Tax loss carryforwards |  | $ | 377 |  |  | $ | 898 |  |  | $ | 954 |  |  | $ | - |  |  | $ | 2,229 |
Tax credit carryforwards |  |  | 417 |  |  |  | 75 |  |  |  | 75 |  |  |  | - |  |  |  | 567 |
Other |  |  | - |  |  |  | - |  |  |  | 498 |  |  |  | 3,094 |  |  |  | 3,592 |
Valuation allowance |  |  | (412 | ) |  |  | (843 | ) |  |  | (268 | ) |  |  | (281 | ) |  |  | (1,804 | )
|  | $ | 382 |  |  | $ | 130 |  |  | $ | 1,259 |  |  | $ | 2,813 |  |  | $ | 4,584 |
* | Deferred tax assets with no expiration may still have annual limitations on utilization. Other represents deferred tax assets whose expiration is dependent upon the reversal of the underlying temporary difference. A substantial amount of Other relates to employee benefits that will become deductible for tax purposes over an extended period of time as contributions are made to employee benefit plans and payments are made to retirees.
The total deferred tax asset (net of valuation allowance) is supported by taxable temporary differences that reverse within the carryforward period (approximately 30%), tax planning strategies (approximately 5%), and projections of future taxable income exclusive of reversing temporary differences (approximately 65%). Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not (greater than 50%) that a tax benefit will not be realized. In evaluating the need for a valuation allowance, management considers all potential sources of taxable income, including income available in carryback periods, future reversals of taxable temporary differences, projections of taxable income, and income from tax planning strategies, as well as all available positive and negative evidence. Positive evidence includes factors such as a history of profitable operations, projections of future profitability within the carryforward period, including from tax planning strategies, and the Alcoa’s experience with similar operations. Existing favorable contracts and the ability to sell products into established markets are additional positive evidence. Negative evidence includes items such as cumulative losses, projections of future losses, or carryforward periods that are not long enough to allow for the utilization of a deferred tax asset based on existing projections of income. In certain jurisdictions, deferred tax assets related to cumulative losses exist without a valuation allowance where in management’s judgment the weight of the positive evidence more than offsets the negative evidence of the cumulative losses. Upon changes in facts and circumstances, management may conclude that deferred tax assets for which no valuation allowance is currently recorded may not be realized, resulting in a future charge to establish a valuation allowance. Existing valuation allowances are re-examined under the same standards of positive and negative evidence. If it is determined that it is more likely than not that a deferred tax asset will be realized, the appropriate amount of the valuation allowance, if any, is released. Deferred tax assets and liabilities are also re-measured to reflect changes in underlying tax rates due to law changes and the granting and lapse of tax holidays. In 2013, Alcoa recognized a $372 discrete income tax charge for valuation allowances on certain deferred tax assets in Spain and the U.S. Of this amount, a $237 valuation allowance was established on the full value of the deferred tax assets related to a Spanish consolidated tax group. As of December 31, 2013, these deferred tax assets have an expiration period ranging from 2014 to 2030. After weighing all available positive and negative evidence, as described above, management determined that it was no longer more likely than not that Alcoa will realize the tax benefit of these deferred tax assets. This was mainly driven by a decline in the outlook of the Primary Metals business (2013 realized prices were the lowest since 2009) combined with prior year cumulative losses of the Spanish consolidated tax group. The need for this valuation allowance will be assessed on a continuous basis in future periods and, as a result, a portion or all of the allowance may be reversed based on changes in facts and circumstances. The remaining $135 relates to a valuation allowance established on a portion of available foreign tax credits in the U.S. These credits can be carried forward for 10 years, and, as of December 31, 2013, have an expiration period ranging from 2016 to 2023. After weighing all available positive and negative evidence, as described above, management determined that it was no longer more likely than not that Alcoa will realize the full tax benefit of these foreign tax credits. This was primarily due to lower foreign sourced taxable income after consideration of tax planning strategies and after the inclusion of earnings from foreign subsidiaries projected to be distributable as taxable foreign dividends. Similar to the outlook related to Spain above, lower levels of both distributable future foreign earnings and projected foreign sourced taxable income are principally attributable to a decline in the outlook of the Primary Metals business. The need for this valuation allowance will be assessed on a continuous basis in future periods and, as a result, an increase or decrease to this allowance may result based on changes in facts and circumstances. In December 2011, one of the Company’s subsidiaries in Brazil applied for a tax holiday related to its expanded mining and refining operations. During 2013, the application was amended and re-filed and, separately, a similar application was filed for another one of the Company’s subsidiaries in Brazil. If approved, the tax rate for these subsidiaries will decrease significantly, resulting in future cash tax savings over the 10-year holiday period (would be retroactively effective as of January 1, 2013). Additionally, the net deferred tax asset of one of the subsidiaries would be remeasured at the lower rate in the period the holiday is approved (the net deferred tax asset of the other subsidiary would not be remeasured since it could still be utilized against future earnings of the subsidiary not subject to the tax holiday). This remeasurement would result in a decrease to that subsidiary’s net deferred tax asset and a noncash charge to earnings of approximately $50. As of December 31, 2013, Alcoa’s subsidiaries’ applications are still pending. The following table details the changes in the valuation allowance:
December 31, |  | 2013 |  |  | 2012 |  |  | 2011 |
Balance at beginning of year |  | $ | 1,400 |  |  | $ | 1,398 |  |  | $ | 1,268 |
Increase to allowance |  |  | 471 |  |  |  | 45 |  |  |  | 157 |
Release of allowance |  |  | (41 | ) |  |  | (31 | ) |  |  | (31 | )
U.S. state tax apportionment and tax rate changes |  |  | (32 | ) |  |  | (17 | ) |  |  | 6 |
Foreign currency translation |  |  | 6 |  |  |  | 5 |  |  |  | (2 | )
Balance at end of year |  | $ | 1,804 |  |  | $ | 1,400 |  |  | $ | 1,398 |
The cumulative amount of Alcoa’s foreign undistributed net earnings for which no deferred taxes have been provided was approximately $5,200 at December 31, 2013. Alcoa has a number of commitments and obligations related to the Company’s growth strategy in foreign jurisdictions. As such, management has no plans to distribute such earnings in the foreseeable future, and, therefore, has determined it is not practicable to determine the related deferred tax liability. Alcoa and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. With a few minor exceptions, Alcoa is no longer subject to income tax examinations by tax authorities for years prior to 2004. All U.S. tax years prior to 2013 have been audited by the Internal Revenue Service. Various state and foreign jurisdiction tax authorities are in the process of examining Alcoa’s income tax returns for various tax years through 2012. A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties) was as follows:
December 31, |  | 2013 |  |  | 2012 |  |  | 2011 |
Balance at beginning of year |  | $ | 66 |  |  | $ | 51 |  |  | $ | 46 |
Additions for tax positions of the current year |  |  | 2 |  |  |  | - |  |  |  | - |
Additions for tax positions of prior years |  |  | 11 |  |  |  | 39 |  |  |  | 13 |
Reductions for tax positions of prior years |  |  | (2 | ) |  |  | (7 | ) |  |  | (3 | )
Settlements with tax authorities |  |  | (8 | ) |  |  | (18 | ) |  |  | (4 | )
Expiration of the statute of limitations |  |  | (2 | ) |  |  | - |  |  |  | - |
Foreign currency translation |  |  | (4 | ) |  |  | 1 |  |  |  | (1 | )
Balance at end of year |  | $ | 63 |  |  | $ | 66 |  |  | $ | 51 |
For all periods presented, a portion of the balance at end of year pertains to state tax liabilities, which are presented before any offset for federal tax benefits. The effect of unrecognized tax benefits, if recorded, that would impact the annual effective tax rate for 2013, 2012, and 2011 would be approximately (1)%, 6%, and 2%, respectively, of pretax book (loss) income. Alcoa does not anticipate that changes in its unrecognized tax benefits will have a material impact on the Statement of Consolidated Operations during 2014 (see Other Matters in Note N for a matter for which no reserve has been recognized). It is Alcoa’s policy to recognize interest and penalties related to income taxes as a component of the Provision for income taxes on the accompanying Statement of Consolidated Operations. In 2013, 2012, and 2011, Alcoa recognized $2, $3, and $2, respectively, in interest and penalties. Due to the expiration of the statute of limitations, settlements with tax authorities, and refunded overpayments, Alcoa also recognized interest income of $12, $7, and $2 in 2013, 2012, and 2011, respectively. As of December 31, 2013 and 2012, the amount accrued for the payment of interest and penalties was $11 and $15, respectively.

X
- Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: 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=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: 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 5: 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 6: 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 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration