Notes To Consolidated Financial Statements - Motorola 8167 - Timeport Cell Phone User Manual

Notes to Consolidated Financial Statements
(In millions, except as noted)
Motorola, Inc. and Consolidated Subsidiaries
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Summary of
Significant
Accounting
Policies
Consolidation: The consolidated financial statements
include the accounts of the Company and all majority-
owned subsidiaries. All significant intercompany accounts
and transactions are eliminated in consolidation.
Cash Equivalents: The Company considers all highly
liquid investments purchased with an original maturity
of three months or less to be cash equivalents.
Inventories: Inventories are valued at the lower of average
cost (which approximates computation on a first-in, first-
out basis) or market (i.e., net realizable value or replace-
ment cost), less progress payments on long-term contracts.
Property, Plant and Equipment: Property, plant and
equipment is stated at cost less accumulated depreciation.
Depreciation is recorded principally using the declining-
balance method, based on the estimated useful lives of
the assets (buildings and building equipment, 5-50 years;
machinery and equipment, 2-12 years).
Foreign Currency Translation: The Company uses the U.S.
dollar as the functional currency for financial reporting.
Gains and losses from translation to U.S. dollars are
included in net earnings. The Company enters into foreign
exchange contracts to hedge its investments in foreign
subsidiaries. Gains and losses on these hedges are also
included in net earnings.
The Company periodically enters into foreign exchange
contracts to hedge identifiable transactions. Gains and
losses from these contracts are classified in net earnings
in the same category as the underlying transaction.
Reclassifications: Certain amounts in the 1989 and 1988
financial statements and related footnotes have been
reclassified to conform to the 1990 presentation. These
reclassifications are not significant.
lax**
The Company provides for income taxes based on earnings
reported for financial statement purposes. Income tax
expense differs from income taxes currently payable be-
cause of timing differences in the recognition of certain
income and expense items for tax and financial statement
purposes.
Components of Earnings before income taxes
1990 1989 1988
United States
Other nations
Total
8381 $342
285 304
S666 $646
Components of Income taxes provided on earnings
1990 1989
$419
193
$612
1988
Current
United States
Other nations
State income taxes (U.S.)
Deferred
Income taxes
$147
51
31
$117 $154
29 38
33 34
229
(62)
179
(31)
226
(59)
$167 $148 $167
Income tax payments were $236 million in 1990,
$159 million in 1989 and $212 million in 1988.
Income taxes are not provided on cumulative undis-
tributed earnings of certain non-U.S. subsidiaries
amounting to $739 million and $649 million at December
31,1990 and 1989, respectively. It is intended that these
earnings will be permanently invested in operations
outside of the U.S. Should these earnings be distributed,
foreign tax credits would reduce the additional U.S.
income tax which would be payable.
At December 31,1990, certain non-U.S. subsidiaries
had loss carryforwards for financial reporting purposes of
approximately $61 million.
The Internal Revenue Service has examined the Federal
income tax returns for Motorola, Inc. through 1985 and
the returns have been settled through 1983. In connection
Differences between income tax expense computed at the
U.S. Federal statutory tax rate of 34% and Income taxes
provided on earnings
1990 1989 1988
Income tax expense at statutory rate $226 $220
Taxes on non-U.S. earnings
State income taxes
Foreign Sales Corporation
Tax credits
Other
Income taxes
(37) (49) (37)
20 21 23
(23) (12) (6)
(4) (8) (4)
(15) (24) (17)
8167 $148 $167
Deferred income tax expense (benefit)
1990 1989 1988
Depreciation
Deferred taxes on non-U.S. earnings
Employee benefits
Inventory valuations
Completed contract accounting
General business credit carryforward
Long-term equipment leases
Other, net
Net change in deferred taxes
$ 6 $ 35 $ 26
21 33 10
(23) (27) 6
(13) (11) _ _ (19)
7 (10) (13)
— — 13
— — (10)
(60) (51) (72)
8(62) $(31) $(59)
with the audits for the years 1984 and 1985, the IRS has
proposed adjustments to the Company's income and tax
credits for those years which would result in substantial
additional tax. The Company disagrees with most of the
proposed adjustments and is contesting them. In the
opinion of the Company's management, the final disposition
of these matters will not have a material adverse effect on
the business or financial position of the Company.
In December 1987, the FASB issued SFAS 96, Account-
ing for Income Taxes, requiring an asset and liability
approach in accounting for deferred income taxes. The
Company has not yet adopted SFAS 96. The FASB has
deferred the required implementation until January 1,
1992. The cumulative impact of adoption is not yet
determinable.
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