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v2.4.1.9

Income Taxes | 12 Months Ended
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Jan. 03, 2015
Income Taxes | Note P — Income Taxes The provision for income taxes was computed based on the following amounts of income before income taxes:
|  | 2014 |  |  | 2013 |  |  | 2012 |
|  | In thousands |
Domestic |  | $ | 460,561 |  |  | $ | 735,177 |  |  | $ | 663,380 |
Foreign |  |  | 891,805 |  |  |  | 827,313 |  |  |  | 758,495 |
Income before income taxes |  | $ | 1,352,366 |  |  | $ | 1,562,490 |  |  | $ | 1,421,875 |
The provision for income taxes consisted of:
|  | 2014 |  |  | 2013 |  |  | 2012 |
|  | In thousands |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 205,618 |  |  | $ | 238,816 |  |  | $ | 231,282 |
Foreign |  |  | 138,634 |  |  |  | 103,752 |  |  |  | 100,635 |
State |  |  | 38,673 |  |  |  | 22,173 |  |  |  | 24,617 |
|  |  | 382,925 |  |  |  | 364,741 |  |  |  | 356,534 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal and state |  |  | (78,362 | ) |  |  | (15,265 | ) |  |  | (13,999 | )
Foreign |  |  | 298 |  |  |  | 2,895 |  |  |  | (6,798 | )
Income taxes |  | $ | 304,861 |  |  | $ | 352,371 |  |  | $ | 335,737 |
The differences between income taxes computed by applying the statutory federal income tax rate and income tax expense in the consolidated financial statements are as follows:
|  | 2014 |  |  | 2013 |  |  | 2012 |
|  | In thousands |
Tax at federal statutory rate |  | $ | 473,328 |  |  | $ | 546,872 |  |  | $ | 497,656 |
State income taxes, net of federal tax benefit |  |  | 21,636 |  |  |  | 19,653 |  |  |  | 24,304 |
Foreign rate differences |  |  | (230,190 | ) |  |  | (187,513 | ) |  |  | (165,318 | )
Goodwill impairment |  |  | 49,840 |  |  |  | — |  |  |  | — |
Change in valuation allowances |  |  | — |  |  |  | (3,422 | ) |  |  | (33,060 | )
Tax credits |  |  | (4,219 | ) |  |  | (16,742 | ) |  |  | — |
Other |  |  | (5,534 | ) |  |  | (6,477 | ) |  |  | 12,155 |
Income taxes |  | $ | 304,861 |  |  | $ | 352,371 |  |  | $ | 335,737 |
Foreign rate differences include tax benefits of $11.2 million, $6.9 million and $14.8 million in 2014, 2013 and 2012, respectively, from the favorable audit outcomes on certain tax matters and from expiration of statutes of limitations. VF has been granted a lower effective income tax rate on taxable earnings for years 2010 through 2014 in a foreign jurisdiction based on investment and employment level requirements. This lower rate, when compared with the country’s statutory rate, resulted in an income tax reduction of $14.9 million ($0.03 per diluted share) in 2014, $10.4 million ($0.02 per diluted share) in 2013 and $6.3 million ($0.01 per diluted share) in 2012. In addition, VF has been granted a lower effective income tax rate on taxable earnings in another foreign jurisdiction for the years 2010 through 2019. This lower rate, when compared with the country’s statutory rate, resulted in an income tax reduction of $6.0 million ($0.01 per diluted share) in 2014, $3.3 million ($0.01 per diluted share) in 2013 and $8.1 million ($0.02 per diluted share) in 2012. Deferred income tax assets and liabilities consisted of the following:
|  | 2014 |  |  | 2013 |
|  | In thousands |
Deferred income tax assets: |  |  |  |  |  |  |  |
Inventories |  | $ | 34,430 |  |  | $ | 29,325 |
Employee compensation and benefits |  |  | 257,187 |  |  |  | 272,910 |
Other accrued expenses |  |  | 162,843 |  |  |  | 168,669 |
Operating loss carryforwards |  |  | 115,259 |  |  |  | 122,895 |
Capital loss carryforwards |  |  | — |  |  |  | 769 |
|  |  | 569,719 |  |  |  | 594,568 |
Valuation allowances |  |  | (96,802 | ) |  |  | (107,521 | )
Deferred income tax assets |  |  | 472,917 |  |  |  | 487,047 |
Deferred income tax liabilities: |  |  |  |  |  |  |  |
Intangible assets |  |  | 652,950 |  |  |  | 761,140 |
Other deferred liabilities |  |  | — |  |  |  | 1,922 |
Deferred income tax liabilities |  |  | 652,950 |  |  |  | 763,062 |
Net deferred income tax assets (liabilities) |  | $ | (180,033 | ) |  | $ | (276,015 | )
Amounts included in the Consolidated Balance Sheets: |  |  |  |  |  |  |  |
Current assets |  | $ | 154,285 |  |  | $ | 169,321 |
Current liabilities (Note J) |  |  | (6,176 | ) |  |  | (9,367 | )
Noncurrent assets (Note H) |  |  | 20,252 |  |  |  | 16,537 |
Noncurrent liabilities (Note L) |  |  | (348,394 | ) |  |  | (452,506 | )
|  | $ | (180,033 | ) |  | $ | (276,015 | )
As of the end of 2014, VF has not provided deferred taxes on $3,296.9 million of undistributed earnings from international subsidiaries where the earnings are considered to be permanently reinvested. VF’s intent is to continue to reinvest these earnings to support the strategic priority for growth in international markets. If management decides at a later date to repatriate these funds to the U.S., VF would be required to provide taxes on these amounts based on applicable U.S. tax rates, net of foreign taxes already paid. VF has not determined the deferred tax liability associated with these undistributed earnings, as such determination is not practicable. VF has potential tax benefits totaling $84.0 million for foreign operating loss carryforwards, of which $79.7 million have an unlimited carryforward life. In addition, there are $3.9 million of potential tax benefits for federal operating loss carryforwards that expire between 2017 and 2027, and $27.3 million of benefits for state operating loss and credit carryforwards that expire between 2015 and 2030. A valuation allowance has been provided where it is more likely than not that the deferred tax assets related to those operating loss carryforwards will not be realized. Valuation allowances totaled $79.7 million for available foreign operating loss carryforwards, $9.2 million for available state operating loss and credit carryforwards, and $7.9 million for other foreign deferred income tax assets. During 2014, VF had a net decrease in valuation allowances of $14.3 million related to foreign operating loss carryforwards and other deferred tax assets, a decrease of $1.7 million related to state operating loss and credit carryforwards, a decrease of $0.7 million related to federal capital loss carryforwards, and an increase of $6.0 million related to foreign currency effects. A reconciliation of the change in the accrual for unrecognized income tax benefits is as follows:
|  | Unrecognized Income Tax Benefits |  |  | Accrued Interest and Penalties |  |  | Unrecognized Income Tax Benefits Including Interest and Penalties |
|  | In thousands |
Balance, December 2011 |  | $ | 104,959 |  |  | $ | 13,132 |  |  | $ | 118,091 |
Additions for current year tax positions |  |  | 18,930 |  |  |  | — |  |  |  | 18,930 |
Additions for prior year tax positions |  |  | 39,616 |  |  |  | 6,199 |  |  |  | 45,815 |
Reductions for prior year — Timberland acquisition |  |  | (5,707 | ) |  |  | 151 |  |  |  | (5,556 | )
Reductions for prior year tax positions |  |  | (19,678 | ) |  |  | (2,314 | ) |  |  | (21,992 | )
Reductions due to statute expirations |  |  | (2,765 | ) |  |  | (207 | ) |  |  | (2,972 | )
Payments in settlement |  |  | (313 | ) |  |  | (140 | ) |  |  | (453 | )
Currency translation |  |  | 252 |  |  |  | — |  |  |  | 252 |
Balance, December 2012 |  |  | 135,294 |  |  |  | 16,821 |  |  |  | 152,115 |
Additions for current year tax positions |  |  | 11,921 |  |  |  | — |  |  |  | 11,921 |
Additions for prior year tax positions |  |  | 10,908 |  |  |  | 4,627 |  |  |  | 15,535 |
Reductions for prior year tax positions |  |  | (8,521 | ) |  |  | (2,130 | ) |  |  | (10,651 | )
Reductions due to statute expirations |  |  | (6,527 | ) |  |  | (626 | ) |  |  | (7,153 | )
Payments in settlement |  |  | (24,422 | ) |  |  | (1,218 | ) |  |  | (25,640 | )
Currency translation |  |  | (139 | ) |  |  | — |  |  |  | (139 | )
Balance, December 2013 |  |  | 118,514 |  |  |  | 17,474 |  |  |  | 135,988 |
Additions for current year tax positions |  |  | 12,850 |  |  |  | — |  |  |  | 12,850 |
Additions for prior year tax positions |  |  | 5,252 |  |  |  | 5,033 |  |  |  | 10,285 |
Reductions for prior year tax positions |  |  | (12,898 | ) |  |  | (2,780 | ) |  |  | (15,678 | )
Reductions due to statute expirations |  |  | (9,159 | ) |  |  | (647 | ) |  |  | (9,806 | )
Payments in settlement |  |  | (657 | ) |  |  | (1,742 | ) |  |  | (2,399 | )
Currency translation |  |  | (298 | ) |  |  | (119 | ) |  |  | (417 | )
Balance, December 2014 |  | $ | 113,604 |  |  | $ | 17,219 |  |  | $ | 130,823 |
|  | 2014 |  |  | 2013 |
|  | In thousands |
Amounts included in the Consolidated Balance Sheets: |  |  |  |  |  |  |  |
Unrecognized income tax benefits, including interest and penalties |  | $ | 130,823 |  |  | $ | 135,988 |
Less deferred tax benefits |  |  | 23,290 |  |  |  | 26,438 |
Total unrecognized tax benefits |  | $ | 107,533 |  |  | $ | 109,550 |
The unrecognized tax benefits of $107.5 million at the end of 2014, if recognized, would reduce the annual effective tax rate. VF files a consolidated U.S. federal income tax return, as well as separate and combined income tax returns in numerous state and foreign jurisdictions. In the U.S., the Internal Revenue Service (“IRS”) examination for tax years 2007, 2008 and 2009 was completed in 2012. VF has appealed the results of the 2007 to 2009 examination to the IRS Appeals office. Tax years prior to 2007 have been effectively settled with the IRS. The IRS commenced its examination of VF’s 2010 and 2011 tax returns during the fourth quarter of 2013 and such examination is still ongoing. During the second quarter of 2014, the IRS completed its examination of Timberland’s 2010 tax return. The examination of Timberland’s 2011 tax return is still ongoing. The IRS has proposed material adjustments to the Timberland tax return, and the Company has formally disagreed with the findings. In addition, VF is currently subject to examination by various state and international tax authorities. Management regularly assesses the potential outcomes of both ongoing and future examinations for the current and prior years, and has concluded that VF’s provision for income taxes is adequate. The outcome of any one examination is not expected to have a material impact on VF’s consolidated financial statements. Management believes that some of these audits and negotiations will conclude during the next 12 months. Management also believes that it is reasonably possible that the amount of unrecognized income tax benefits may decrease by $44.9 million within the next 12 months due to settlement of audits and expiration of statutes of limitations, $38.0 million of which would reduce income tax expense.

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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 -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
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