Mondelez International, Inc. | 2013 | FY |

Note 15. Income Taxes

See Note 1, Summary of Significant Accounting Policies, for information related to the revision of income taxes for all years presented below.

Earnings / (losses) from continuing operations before income taxes and the provision for income taxes consisted of the following for the years ended December 31, 2013, 2012 and 2011:

 

See Note 2, Divestitures and Acquisition, for information on taxes presented as part of discontinued operations related to the resolution of the Starbucks arbitration and the Spin-Off of Kraft Foods Group.

The effective income tax rate on pre-tax earnings differed from the U.S. federal statutory rate for the following reasons for the years ended December 31, 2013, 2012 and 2011:

 

Our 2013 effective tax rate of 2.5% was favorably impacted by the mix of pre-tax income in various foreign jurisdictions, net tax benefits from discrete one-time events and the non-taxable portion of the Cadbury acquisition related indemnification resolution, partially offset by an unfavorable tax law change. The $299 million of discrete one-time events primarily related to favorable tax audit settlements and expirations of statutes of limitations in several jurisdictions and the net reduction of U.K. deferred tax liabilities resulting from tax legislation enacted during 2013 that reduced U.K. corporate income tax rates.

 

Our 2012 revised effective tax rate of 9.5% was favorably impacted by the mix of pre-tax income in various foreign jurisdictions and net tax benefits from discrete one-time tax events, partially offset by non-deductible expenses. The $140 million of discrete one-time events primarily related to the net reduction of U.K. deferred tax liabilities resulting from tax legislation enacted during 2012 that reduced U.K. corporate income tax rates and net favorable tax audit settlements.

Our 2011 revised effective tax rate of 6.2% was favorably impacted by the mix of pre-tax income in various foreign jurisdictions and net tax benefits of $253 million from discrete one-time events, primarily from the net reduction of U.K. deferred tax liabilities resulting from tax legislation enacted in 2011 that reduced U.K. corporate income tax rates, the net favorable impact from tax audit developments during the year, the reversal of valuation allowances on certain foreign deferred tax assets that are now expected to be realized and adjustments to taxes payable as a result of tax return filings.

The tax effects of temporary differences that gave rise to deferred income tax assets and liabilities consisted of the following at December 31, 2013 and 2012:

 

Our significant valuation allowances reside within our operating subsidiaries in Mexico, Ireland and various other jurisdictions.

At December 31, 2013, applicable U.S. federal income taxes and foreign withholding taxes had not been provided on approximately $12.4 billion of accumulated earnings of foreign subsidiaries that are expected to be indefinitely reinvested. It is impractical for us to determine the amount of unrecognized deferred tax liabilities on these indefinitely reinvested earnings. Future tax law changes or changes in the needs of our foreign subsidiaries could require us to recognize deferred tax liabilities on a portion, or all, of our accumulated earnings that were previously expected to be indefinitely reinvested.

The changes in our unrecognized tax benefits for the years ended December 31, 2013, 2012 and 2011 were:

 

 

As of January 1, 2013, our unrecognized tax benefits were $1,164 million. If we had recognized all of these benefits, the net impact on our income tax provision would have been $1,096 million. Our unrecognized tax benefits were $1,189 million at December 31, 2013, and if we had recognized all of these benefits, the net impact on our income tax provision would have been $1,110 million. Within the next 12 months, our unrecognized tax benefits could increase by approximately $50 million due to unfavorable audit developments or decrease by approximately $350 million due to audit settlements and the expiration of statutes of limitations in various jurisdictions. We include accrued interest and penalties related to uncertain tax positions in our tax provision. We had accrued interest and penalties of $230 million as of January 1, 2013 and $228 million as of December 31, 2013. Our 2013 provision for income taxes included $6 million for interest and penalties and we paid interest and penalties of $1 million during 2013.

Under the Tax Sharing and Indemnity Agreements between us and Kraft Foods Group, Kraft Foods Group generally assumes liability for all U.S. state income taxes and Canadian federal and provincial income taxes and we generally assume responsibility for all U.S. federal income taxes and substantially all foreign income taxes, excluding Canadian income taxes, for all tax periods prior to the Spin-Off. In addition, we transferred to Kraft Foods Group all of its deferred tax assets and liabilities as of the Distribution Date. See Note 2, Divestitures and Acquisition.

We are regularly examined by federal and various state and foreign tax authorities. We are currently under various income tax examinations by the IRS for the years 2007 through 2009. Our income tax filings are also currently under examination by tax authorities in various U.S. state and foreign jurisdictions. U.S. state and foreign jurisdictions have statutes of limitations generally ranging from three to five years; however, these statutes are often extended by mutual agreement with the tax authorities. Years still open to examination by foreign tax authorities in major jurisdictions include (earliest open tax year in parentheses): Germany (2005), Brazil (2008), France (2010), United Kingdom (2007), Australia (2009), Russia (2011) and India (2003).