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Income Taxes | 12 Months Ended
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Feb. 02, 2013
Income Tax Disclosure [Abstract] |
Income Taxes | Note 12. Income Taxes For financial reporting purposes, components of income before income taxes are as follows:
|  | Fiscal Year
($ in millions) |  | 2012 |  | 2011 |  | 2010
United States |  | $ | 1,692 |  |  | $ | 1,253 |  |  | $ | 1,686 |
Foreign |  | 169 |  |  | 116 |  |  | 296 |
Income before income taxes |  | $ | 1,861 |  |  | $ | 1,369 |  |  | $ | 1,982 |
The provision for income taxes consists of the following:
|  | Fiscal Year
($ in millions) |  | 2012 |  | 2011 |  | 2010
Current: |  |  |  |  |  |
Federal |  | $ | 617 |  |  | $ | 419 |  |  | $ | 476 |
State |  | 56 |  |  | 37 |  |  | 75 |
Foreign |  | 90 |  |  | 91 |  |  | 134 |
Total current |  | 763 |  |  | 547 |  |  | 685 |
Deferred: |  |  |  |  |  |
Federal |  | (37 | ) |  | 14 |  |  | 94 |
State |  | (6 | ) |  | (6 | ) |  | (5 | )
Foreign |  | 6 |  |  | (19 | ) |  | 4 |
Total deferred |  | (37 | ) |  | (11 | ) |  | 93 |
Total provision |  | $ | 726 |  |  | $ | 536 |  |  | $ | 778 |
Except as noted below and where required by U.S. tax law, no provision has been made for U.S. income taxes on the undistributed earnings of our foreign subsidiaries as we intend to utilize those earnings in our foreign operations for an indefinite period of time. Such undistributed earnings and profits, as calculated pursuant to provisions in the U.S. Internal Revenue Code and related Treasury Regulations, of foreign subsidiaries as of February 2, 2013 and January 28, 2012 were approximately $1.7 billion and $1.5 billion, respectively. Cash balances in these foreign subsidiaries are substantially lower than these earnings and profits. If we had not intended to utilize the undistributed earnings in our foreign operations for an indefinite period of time, the deferred tax liability as of February 2, 2013 and January 28, 2012 would have been approximately $237 million and $225 million, respectively. In fiscal 2012, we assessed the forecasted cash needs and overall financial position of our foreign subsidiaries. As a result, we determined that approximately $54 million of undistributed earnings was in excess of the amount we expect to utilize in the operations of our Canadian subsidiaries for an indefinite period of time, and accordingly, we have established a deferred tax liability for U.S. income taxes with respect to such earnings as of February 2, 2013 and we have recorded related tax expense of $5 million. The difference between the effective tax rate and the U.S. federal tax rate is as follows:
|  | Fiscal Year
|  | 2012 |  | 2011 |  | 2010
Federal tax rate |  | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State income taxes, less federal benefit |  | 2.7 |  |  | 2.2 |  |  | 3.5 |
Tax impact of foreign operations |  | 2.0 |  |  | 2.1 |  |  | 1.3 |
Other |  | (0.7 | ) |  | (0.1 | ) |  | (0.5 | )
Effective tax rate |  | 39.0 | % |  | 39.2 | % |  | 39.3 | %
In fiscal 2012, we changed the presentation of our effective tax rate reconciliation to reflect the impact of state and foreign tax credits and other related items in the corresponding line items in the table. Previously, these items were included in Other within the table. The reconciliations for fiscal 2011 and 2010 have been conformed to reflect these changes in presentation. Deferred tax assets (liabilities) consist of the following:
($ in millions) |  | February 2, 2013 |  | January 28, 2012
Deferred tax assets: |  |  |  |
Deferred rent |  | $ | 136 |  |  | $ | 137 |
Accrued payroll and related benefits |  | 124 |  |  | 66 |
Nondeductible accruals |  | 79 |  |  | 74 |
Inventory capitalization and other adjustments |  | 66 |  |  | 65 |
Depreciation |  | — |  |  | 18 |
State and foreign net operating losses ("NOLs") |  | 37 |  |  | 36 |
Fair value of derivative financial instruments included in accumulated OCI |  | — |  |  | (5 | )
Other |  | 100 |  |  | 83 |
Total deferred tax assets |  | 542 |  |  | 474 |
Valuation allowance |  | (56 | ) |  | (39 | )
Total deferred tax liabilities |  | (59 | ) |  | (15 | )
Net deferred tax assets |  | $ | 427 |  |  | $ | 420 |
Current portion (included in other current assets) |  | $ | 220 |  |  | $ | 205 |
Non-current portion (included in other long-term assets) |  | 207 |  |  | 215 |
Total |  | $ | 427 |  |  | $ | 420 |
As of February 2, 2013, we had approximately $50 million state and $137 million foreign NOL carryovers in multiple taxing jurisdictions that could be utilized to reduce the tax liabilities of future years. The tax-effected NOL was approximately $3 million for state and $34 million for foreign as of February 2, 2013. We provided a valuation allowance of approximately $1 million and $33 million against the deferred tax asset related to the state and foreign NOLs, respectively. The state losses expire between fiscal 2022 and fiscal 2023, approximately $106 million of the foreign losses expire between fiscal 2013 and fiscal 2021, and $31 million of the foreign losses do not expire. The activity related to our unrecognized tax benefits is as follows:
|  | Fiscal Year
($ in millions) |  | 2012 |  | 2011 |  | 2010
Balance at beginning of fiscal year |  | $ | 102 |  |  | $ | 67 |  |  | $ | 132 |
Increases related to current year tax positions |  | 10 |  |  | 10 |  |  | 10 |
Prior year tax positions: |  |  |  |  |  |
Increases |  | 10 |  |  | 31 |  |  | 15 |
Decreases |  | (12 | ) |  | (2 | ) |  | (74 | )
Cash settlements |  | (4 | ) |  | (2 | ) |  | (4 | )
Expiration of statute of limitations |  | 3 |  |  | (1 | ) |  | (14 | )
Foreign currency translation |  | — |  |  | (1 | ) |  | 2 |
Balance at end of fiscal year |  | $ | 109 |  |  | $ | 102 |  |  | $ | 67 |
Of the $109 million, $102 million, and $67 million of total unrecognized tax benefits as of February 2, 2013, January 28, 2012, and January 29, 2011, respectively, approximately $29 million, $25 million, and $5 million (net of the federal benefit on state issues), respectively, represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. During fiscal 2012 and 2011, interest expense of $5 million and $6 million, respectively, was recognized in the Consolidated Statements of Income relating to tax liabilities. During fiscal 2010, an interest expense reversal of $15 million was recognized in the Consolidated Statement of Income. As of February 2, 2013 and January 28, 2012, the Company had total accrued interest related to the unrecognized tax benefits of $33 million and $29 million, respectively. There were no accrued penalties related to the unrecognized tax benefits as of February 2, 2013 or January 28, 2012. The Company conducts business globally, and as a result, files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as the United States, Canada, France, Hong Kong, Japan, India, and the United Kingdom. We are no longer subject to U.S. federal income tax examinations for fiscal years before 2009, and with few exceptions, we are also no longer subject to U.S. state, local, or non-U.S. income tax examinations for fiscal years before 2007. The Company engages in continual discussions with taxing authorities regarding tax matters in the various U.S. and foreign jurisdictions. It is reasonably possible that we will recognize a decrease in gross unrecognized tax benefits within the next 12 month of up to $50 million, primarily due to the possible completion of several advance pricing agreements and the closing of audits. If we do recognize such a decrease, the net impact on the Consolidated Statement of Income would be a benefit to our income taxes of approximately $10 million.

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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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