|6 Months Ended|
Jun. 25, 2016
|Income Tax Disclosure [Abstract]|
In the second quarter of 2016, the Company recorded an income tax provision of $29 million. This included $2 million due primarily to foreign taxes in profitable locations and $2 million for withholding taxes applicable to license fee revenue from foreign locations partially offset by $2 million of tax benefits arising from other comprehensive income and Canadian tax credits. In addition, the Company recorded the tax effect of completion of the sale of a majority equity interest in two subsidiaries comprising $21 million of income tax expense in China and $6 million of withholding tax expense associated with a future repatriation of the gain generated in China by the Chinese portion of that transaction (see Note 4. Equity Interest Purchase Agreement - ATMP Joint Venture).
In future periods, the Company will apply the equity method of accounting to its 15% investment in the two former subsidiaries. The Company's share of applicable tax expense will be netted with the equity share of future profits or losses. In 2015, the Company recorded an income tax provision of $2 million related to the activities of the two former subsidiaries.
The Company has not recognized the tax benefit of future foreign tax credits associated with the withholding tax expense as the size and age profile of existing tax attributes does not allow it to satisfy the "more likely than not" criterion for the recognition of deferred tax assets.
For the six months ended June 25, 2016, the Company recorded an income tax provision of $30 million due to foreign taxes in profitable locations and items identified above.
In the second quarter of 2015 and for the six months ended June 27, 2015, the Company recorded an income tax provision of $1 million and $4 million, respectively, due to foreign taxes in profitable locations.
As of June 25, 2016, substantially all of the Company’s U.S. and Canadian deferred tax assets, net of deferred tax liabilities, continue to be subject to a valuation allowance. The realization of these assets is dependent on substantial future taxable income which, as of June 25, 2016, in management’s estimate, is not more likely than not to be achieved.
The Company's total gross unrecognized tax benefits as of June 25, 2016 were $41 million. The Company currently does not expect to reduce its unrecognized tax benefits over the next 12 months. The Company does not believe it is reasonably possible that other unrecognized tax benefits will materially change in the next 12 months. However, the settlement, resolution or closure of tax audits are highly uncertain.
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.
Reference 1: http://www.xbrl.org/2003/role/presentationRef