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Income Taxes (Notes) | 12 Months Ended
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Dec. 31, 2012
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The components of income before income taxes, equity earnings and the impact of noncontrolling interests are listed below.
| Years ended December 31,
| 2012 |  | 2011 |  | 2010
Domestic | $ | 386.9 |  |  | $ | 428.4 |  |  | $ | 216.2 |
Foreign | 287.9 |  |  | 310.0 |  |  | 234.4 |
Total | $ | 674.8 |  |  | $ | 738.4 |  |  | $ | 450.6 |
The provision for income taxes is listed below.
| Years ended December 31,
| 2012 |  | 2011 |  | 2010
U.S. federal income taxes (including foreign withholding taxes): |  |  |  |  |
Current | $ | 9.4 |  |  | $ | 0.9 |  |  | $ | 13.7 |
Deferred | 118.1 |  |  | 92.3 |  |  | 60.2 |
| 127.5 |  |  | 93.2 |  |  | 73.9 |
State and local income taxes: |  |  |  |  |
Current | 17.1 |  |  | 12.3 |  |  | 16.8 |
Deferred | 25.3 |  |  | 11.3 |  |  | (0.1 | )
| 42.4 |  |  | 23.6 |  |  | 16.7 |
Foreign income taxes: |  |  |  |  |
Current | 83.2 |  |  | 93.1 |  |  | 84.8 |
Deferred | (39.8 | ) |  | (19.7 | ) |  | (4.1 | )
| 43.4 |  |  | 73.4 |  |  | 80.7 |
Total | $ | 213.3 |  |  | $ | 190.2 |  |  | $ | 171.3 |
A reconciliation of the effective income tax rate before equity earnings and the impact of noncontrolling interests as reflected in our Consolidated Statements of Operations to the U.S. federal statutory income tax rate is listed below.
| Years ended December 31,
| 2012 |  | 2011 |  | 2010
U.S. federal statutory income tax rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Income tax provision at U.S. federal statutory rate | $ | 236.2 |  |  | $ | 258.4 |  |  | $ | 157.7 |
State and local income taxes, net of federal income tax benefit | 27.3 |  |  | 15.3 |  |  | 10.8 |
Impact of foreign operations, including withholding taxes | 8.4 |  |  | (21.9 | ) |  | 4.7 |
Change in net valuation allowance 1 | (57.3 | ) |  | (32.9 | ) |  | (2.4 | )
Worthless securities deduction | 0.0 |  |  | (23.0 | ) |  | (2.5 | )
Increases (decreases) in unrecognized tax benefits, net | 24.1 |  |  | (2.7 | ) |  | 8.9 |
Other | (25.4 | ) |  | (3.0 | ) |  | (5.9 | )
Provision for income taxes | $ | 213.3 |  |  | $ | 190.2 |  |  | $ | 171.3 |
Effective income tax rate on operations | 31.6 | % |  | 25.8 | % |  | 38.0 | %
1 | Reflects changes in valuation allowance that impacted the effective income tax rate for each year presented.
In 2012, our effective income tax rate of 31.6% was positively impacted by the reversals of valuation allowances associated with the Asia Pacific and Continental Europe regions, of $26.2 and $21.8, respectively, as well as by a benefit derived from the deduction of foreign tax credits that previously had a full valuation allowance. Our effective income tax rate was negatively impacted by an adjustment of $19.5 associated with the establishment of a previously unrecorded reserve for a tax contingency for the years 2007 through 2010, losses in certain foreign locations where we receive no tax benefit due to 100% valuation allowances and state and local income taxes, net of federal income tax benefit. In 2011, our effective income tax rate of 25.8% was positively impacted primarily from the utilization of capital losses to offset nearly all of the $132.2 capital gain realized from the Facebook transaction. The capital gain enabled us to use capital loss carryforwards, on which a 100% valuation allowance had been previously established, and capital losses attributable to worthless securities in a consolidated subsidiary. Additionally, our effective income tax rate was positively impacted by the recognition of previously unrecognized tax benefits as a result of the effective settlement of the 2007-2008 IRS audit cycle, a lower effective income tax rate on non-U.S. operations and the net reversal of valuation allowances, primarily in the Continental Europe region. The effective income tax rate was negatively impacted by state and local taxes and losses in certain foreign locations where we receive no tax benefit due to 100% valuation allowances. The components of deferred tax assets and liabilities are listed below.
| December 31,
| 2012 |  | 2011
Postretirement/post-employment benefits | $ | 40.4 |  |  | $ | 42.4 |
Deferred compensation | 192.4 |  |  | 205.2 |
Pension costs | 27.0 |  |  | 14.2 |
Basis differences in fixed assets | 26.9 |  |  | 81.8 |
Rent | 50.2 |  |  | 38.6 |
Interest | 66.9 |  |  | 54.8 |
Accruals and reserves | 51.1 |  |  | 55.6 |
Allowance for doubtful accounts | 9.2 |  |  | 8.1 |
Basis differences in intangible assets | (364.9 | ) |  | (330.1 | )
Investments in equity securities | (5.2 | ) |  | 30.8 |
Tax loss/tax credit carry forwards | 449.7 |  |  | 478.1 |
Restructuring and other reorganization-related costs | 1.2 |  |  | 2.0 |
Other | 88.3 |  |  | 92.2 |
Total deferred tax assets, net | 633.2 |  |  | 773.7 |
Valuation allowance | (392.9 | ) |  | (489.9 | )
Net deferred tax assets | $ | 240.3 |  |  | $ | 283.8 |
We evaluate the realizability of our deferred tax assets on a quarterly basis. A valuation allowance is established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. In circumstances where there is negative evidence, establishment of a valuation allowance is considered. We believe that cumulative losses in the most recent three-year period represent significant negative evidence, and as a result, we determined that certain of our deferred tax assets required the establishment of a valuation allowance. The realization of our deferred tax assets is primarily dependent on future earnings. The amount of the deferred tax assets considered realizable could be reduced in the near future if estimates of future taxable income are lower than anticipated. The deferred tax assets for which an allowance was recognized relate primarily to state and foreign tax loss carryforwards. The change in the valuation allowance is listed below.
| Years ended December 31,
| 2012 |  | 2011 |  | 2010
Balance at beginning of period | $ | 489.9 |  |  | $ | 508.1 |  |  | $ | 425.5 |
(Reversed) charged to costs and expenses | (49.5 | ) |  | (25.1 | ) |  | 92.3 |
Charged (reversed) to gross tax assets and other accounts | (47.5 | ) |  | 6.9 |  |  | (9.7 | )
Balance at end of period | $ | 392.9 |  |  | $ | 489.9 |  |  | $ | 508.1 |
In 2012, amounts reversed to costs and expenses primarily relate to the net reversal of valuation allowances in the Asia Pacific and Continental Europe regions, based on positive evidence in the form of a sustained pattern of profitability. Amounts reversed to gross tax assets and other accounts relate primarily to the reversal of valuation allowance on foreign tax credits. In 2011, amounts reversed to costs and expenses primarily relate to the utilization of capital loss carryforwards and the expiration of foreign tax credits on which 100% valuation allowances had been established, and the net reversal of valuation allowances based on positive evidence in the form of a sustained pattern of profitability. These reversals were partially offset by the establishment of an additional deferred tax asset and a corresponding valuation allowance for a Luxembourg tax loss carryforward. In 2010, amounts charged to costs and expenses primarily relate to the establishment of a deferred tax asset and a corresponding valuation allowance for a Luxembourg tax loss carryforward, which were first available for effective utilization in 2011. This resulted from restructuring due to a tax law change in Luxembourg. Amounts reversed to gross tax assets and other accounts relate primarily to the effect of foreign currency translation. As of December 31, 2012, there are $1,356.6 of loss carryforwards, of which $15.1 are U.S. tax loss carryforwards that expire in the years 2026 through 2029. The remaining $1,341.5 are non-U.S. tax loss carryforwards, of which $1,091.1 have unlimited carryforward periods and $250.4 have expiration periods from 2013 through 2031. As of December 31, 2012 and 2011, we had $2,110.0 and $1,766.7, respectively, of undistributed earnings attributable to foreign subsidiaries. It is our intention to permanently reinvest undistributed earnings of our foreign subsidiaries. We have not provided deferred U.S. income taxes or foreign withholding taxes on temporary differences resulting from earnings for certain foreign subsidiaries which are permanently reinvested outside the U.S. It is not practicable to determine the amount of unrecognized deferred tax liability associated with these temporary differences. The table below summarizes the activity related to our unrecognized tax benefits.
| December 31,
| 2012 |  | 2011 |  | 2010
Balance at beginning of period | $ | 161.0 |  |  | $ | 146.7 |  |  | $ | 160.5 |
Increases as a result of tax positions taken during a prior year | 28.2 |  |  | 5.3 |  |  | 4.6 |
Decreases as a result of tax positions taken during a prior year | (6.8 | ) |  | (18.1 | ) |  | (28.1 | )
Settlements with taxing authorities | (0.7 | ) |  | (5.0 | ) |  | (10.2 | )
Lapse of statutes of limitation | (1.1 | ) |  | (0.2 | ) |  | (0.6 | )
Increases as a result of tax positions taken during the current year | 14.0 |  |  | 32.3 |  |  | 20.5 |
Balance at end of period | $ | 194.6 |  |  | $ | 161.0 |  |  | $ | 146.7 |
Included in the total amount of unrecognized tax benefits of $194.6 as of December 31, 2012, is $193.5 of tax benefits that, if recognized, would impact the effective income tax rate. The total amount of accrued interest and penalties as of December 31, 2012 and 2011 is $13.5 and $12.1, respectively, of which a detriment of $1.4 and $0.2 is included in our 2012 and 2011 Consolidated Statements of Operations, respectively. In accordance with our accounting policy, interest and penalties accrued on unrecognized tax benefits are classified as income taxes in our Consolidated Statements of Operations. In 2011, we effectively settled the 2007-2008 IRS audit cycle. The settlement resulted in no cash payment and our effective income tax rate was positively impacted by the recognition of previously unrecognized tax benefits. We have various tax years under examination by tax authorities in various countries, and in various states, such as New York, in which we have significant business operations. It is not yet known whether these examinations will, in the aggregate, result in our paying additional taxes. We believe our tax reserves are adequate in relation to the potential for additional assessments in each of the jurisdictions in which we are subject to taxation. We regularly assess the likelihood of additional tax assessments in those jurisdictions and, if necessary, adjust our reserves as additional information or events require. With respect to all tax years open to examination by U.S. federal, various state and local, and non-U.S. tax authorities, we currently anticipate that total unrecognized tax benefits will decrease by an amount between $30.0 and $40.0 in the next twelve months, a portion of which will affect our effective income tax rate, primarily as a result of the settlement of tax examinations and the lapsing of statutes of limitations. This net decrease is related to various items of income and expense, primarily transfer pricing adjustments. We are effectively settled with respect to U.S. income tax audits for years prior to 2009. With limited exceptions, we are no longer subject to state and local income tax audits for years prior to 1999, or non-U.S. income tax audits for years prior to 2005.

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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 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 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=6881521&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 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: 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 6: 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 7: 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 8: 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
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