v2.4.0.6

Provision for Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Components of Income (Loss) Before Income Taxes

The components of income (loss) before income taxes are as follows:

		2012				2011				2010
Netherlands			(93	)			(27	)			(490	)
Foreign			68				127				135
			(25	)			100				(355	)

Components of Provision for Income Taxes

The components of the provision for income taxes are as follows:

		2012				2011				2010
Current taxes:
Netherlands			(1	)			(3	)			(12	)
Foreign			(20	)			(29	)			(40	)
			(21	)			(32	)			(52	)
Deferred taxes:
Netherlands			5				(10	)			3
Foreign			15				21				25
			20				11				28
Total provision for income taxes			(1	)			(21	)			(24	)

Reconciliation of Statutory Income Tax Rate

A reconciliation of the statutory income tax rate in the Netherlands as a percentage of income (loss) before income taxes and the effective income tax rate is as follows:

(in percentages)		2012				2011				2010
Statutory income tax in the Netherlands			25.0				25.0				25.5
Increase (reduction) in rate resulting from:
Rate differential local statutory rates versus statutory rate of the Netherlands			64.0				(15.7	)			1.6
Net change in valuation allowance			(178.0	)			12.7				(16.7	)
Prior year adjustments			5.2				(2.0	)			(1.6	)
Non-taxable income			41.6				(10.8	)			0.7
Non-tax-deductible expenses/losses			(69.6	)			19.6				(12.3	)
Other taxes and tax rate changes			18.2				(1.0	)			0.1
Withholding taxes			(7.6	)			6.9				(4.1	)
Unrecognized tax benefits			(24.8	)			(1.0	)			(2.5	)
Tax incentives			122.0				(12.7	)			2.5
Effective tax rate			(4.0	)%			21.0	%			(6.8	)%

Principal Components of Deferred Tax Assets and Liabilities

The principal components of deferred tax assets and liabilities are presented below:

		2012								2011
		Assets				Liabilities				Assets				Liabilities
Intangible assets			13				(200	)			22				(245	)
Property, plant and equipment			20				(33	)			25				(28	)
Inventories			2				—				1				—
Receivables			1				—				—				(13	)
Other assets			3				(5	)			—				(4	)
Liabilities:
Pensions			42				(1	)			27				(2	)
Restructuring			46				—				23				—
Other			21				—				27				(1	)
Long-term debt			1				(7	)			—				(22	)
Undistributed earnings of foreign subsidiaries			—				(27	)			—				(27	)
Tax loss carryforwards (including tax credit carryforwards)			659				—				694				—
Total gross deferred tax assets (liabilities)			808				(273	)			819				(342	)
Net deferred tax position			535								477
Valuation allowances			(589	)							(545	)
Net deferred tax assets (liabilities)			(54	)							(68	)

Expiration of Tax Loss Carryforwards

At December 31, 2012 tax loss carryforwards of $2,515 million will expire as follows:

		Balance December  31, 2012				Scheduled expiration
						2013				2014				2015				2016				2017				2018-2022				later				unlimited
Tax loss carryforwards			2,515				1				5				191				748				525				159				156				730

Expiration of Tax Credit Carryforwards

The Company also has tax credit carryforwards of $92 million, which are available to offset future tax, if any, and which will expire as follows:

		Balance December  31, 2012				Scheduled expiration
						2013				2014				2015				2016				2017				2018-2022				later				unlimited
Tax credit carryforwards			92				—				—				—				—				—				—				10				82

Classification of Deferred Tax Assets and Liabilities in Consolidated Balance Sheets

The classification of the deferred tax assets and liabilities in the Company’s consolidated balance sheets is as follows:

		2012				2011
Deferred tax assets within current assets			12				5
Deferred tax assets within other non-current assets			22				19
Deferred tax liabilities within accrued liabilities			(4	)			(1	)
Deferred tax liabilities within other non-current liabilities			(84	)			(91	)
			(54	)			(68	)

Reconciliation of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

		2012				2011				2010
Balance as of January 1,			169				195				52
Increases from tax positions taken during prior periods			16				—				10
Decreases from tax positions taken during prior periods			(25	)			(12	)			(7	)
Increases from tax positions taken during current period			2				10				140
Decreases relating to settlements with the tax authorities			(23	)			(24	)			—
Balance as of December 31,			139				169				195

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