The Portable MBA in Finance and Accounting, 3rd Edition

Analyzing Business Earnings 79

EXHIBIT 2.29 (Continued)

1996 1997

Deferred tax liabilities:
Property $ 62.3 $ 90.6
Other assets 57.7 147.5
Excess costs arising from acquisitions 64.0 67.6
Undistributed earnings of foreign subsidiaries 41.3 41.3
Other 37.4 36.5
Total $262.7 $ 383.5

Deferred tax assets:
Receivables $ 4.1 $ 2.8
Inventory 72.4 72.4
Employee benefits 44.0 21.5
Other accrued expenses 20.2 40.6
Operating loss carryfor wards 16.6 9.0
Tax credit carryfor wards 30.8 15.9
Other 15.9 34.9
Subtotal $204.0 $ 197.1
Valuation allowance (13.1) (5.7)
Total 190.9 191.4
Net deferred tax liability $ 71.8 $ 192.1

A valuation allowance is recorded when it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets
depends on the ability to generate sufficient taxable income of the appropriate character in
the future. The Company has reserved the operating loss carryfor wards in certain non-U.S.
jurisdictions where its operations have decreased, currently ceased or the Company has with-
drawn entirely.
Provision has been made for U.S. and additional foreign taxes for the anticipated repa-
triation of certain earnings of foreign subsidiaries of the Company. The Company considers
the undistributed earnings of its foreign subsidiaries above the amounts already provided for
to be permanently reinvested. These additional foreign earnings could become subject to ad-
ditional tax if remitted, or deemed remitted, as a dividend; however, the additional amount of
taxes payable is not practicable to estimate.

SOURCE: Baker Hughes Inc., annual report, September 1997, 48– 49.