Devon Energy (DVN)

 

Devon is subject to current income taxes assessed by the federal and various state jurisdictions in the United States and by other foreign jurisdictions. In addition, Devon accounts for deferred income taxes related to these jurisdictions using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets are also recognized for the future tax benefits attributable to the expected utilization of existing tax net operating loss carryforwards and other types of carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

At December 31, 2007, undistributed earnings of foreign subsidiaries included in continuing operations were determined to be permanently reinvested. Therefore, no U.S. deferred income taxes were provided on such amounts at December 31, 2007. If it becomes apparent that some or all of the undistributed earnings will be distributed, Devon would then record taxes on those earnings.

 

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109. Interpretation No. 48 prescribes a threshold for recognizing the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by a taxing authority. Recognized tax positions are initially and subsequently measured as the largest amount of tax benefit that is more likely than not of being realized upon ultimate settlement with a taxing authority. Liabilities for unrecognized tax benefits related to such tax positions are included in other long-term liabilities unless the tax position is expected to be settled within the upcoming year, in which case the liabilities are included in accrued expenses and other current liabilities. Interest and penalties related to unrecognized tax benefits are included in income tax expense.

 

On January 1, 2007, Devon adopted Interpretation No. 48 and recorded an $11 million reduction to the January 1, 2007 balance of retained earnings related to unrecognized tax benefits. The $11 million included $8 million for related interest and penalties. An additional $3 million of liabilities were recorded with a corresponding increase to goodwill.

 

As a result of the adoption of Interpretation No. 48, certain liabilities included in income taxes payable and deferred income taxes were reclassified to other current and long-term liabilities in the accompanying balance sheet. The total $14 million increase in liabilities included a $17 million increase to long-term liabilities, partially offset by a $3 million reduction to current liabilities.

 

Additional information regarding Devon’s unrecognized tax benefits, including changes in such amounts during 2007, is provided in Note 12.

 

 

Devon is subject to current income taxes assessed by the federal
and various state jurisdictions in the United States and by
other foreign jurisdictions. In addition, Devon accounts for
deferred income taxes related to these jurisdictions using the
asset and liability method. Under this method, deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of assets and liabilities and their
respective tax bases. Deferred tax assets are also recognized
for the future tax benefits attributable to the expected
utilization of existing tax net operating loss carryforwards and
other types of carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences and carryforwards are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that
includes the enactment date.

 

At December 31, 2007, undistributed earnings of foreign
subsidiaries included in continuing operations were determined
to be permanently reinvested. Therefore, no U.S. deferred
income taxes were provided on such amounts at December 31,
2007. If it becomes apparent that some or all of the
undistributed earnings will be distributed, Devon would then
record taxes on those earnings.

 

In June 2006, the Financial Accounting Standards Board
(“FASB”) issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes — an
interpretation of FASB Statement No. 109.
Interpretation No. 48 prescribes a threshold for
recognizing the financial statement effects of a tax position
when it is more likely than not, based on the technical merits,
that the position will be sustained upon examination by a taxing
authority. Recognized tax positions are initially and
subsequently measured as the largest amount of tax benefit that
is more likely than not of being realized upon ultimate
settlement with a taxing authority. Liabilities for unrecognized
tax benefits related to such tax positions are included in other
long-term liabilities unless the tax position is expected to be
settled within the upcoming year, in which case the liabilities
are included in accrued expenses and other current liabilities.
Interest and penalties related to unrecognized tax benefits are
included in income tax expense.

 

On January 1, 2007, Devon adopted Interpretation
No. 48 and recorded an $11 million reduction to the
January 1, 2007 balance of retained earnings related to
unrecognized tax benefits. The $11 million included
$8 million for related interest and penalties. An
additional $3 million of liabilities were recorded with a
corresponding increase to goodwill.

 

As a result of the adoption of Interpretation No. 48,
certain liabilities included in income taxes payable and
deferred income taxes were reclassified to other current and
long-term liabilities in the accompanying balance sheet. The
total $14 million increase in liabilities included a
$17 million increase to long-term liabilities, partially
offset by a $3 million reduction to current liabilities.

 

Additional information regarding Devon’s unrecognized tax
benefits, including changes in such amounts during 2007, is
provided in Note 12.

 

 

Devon is subject to current income taxes assessed by the federal and various state jurisdictions in the United States and by other foreign jurisdictions. In addition, Devon accounts for deferred income taxes related to these jurisdictions using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets are also recognized for the future tax benefits attributable to the expected utilization of existing tax net operating loss carryforwards and other types of carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

At December 31, 2007, undistributed earnings of foreign subsidiaries included in continuing operations were determined to be permanently reinvested. Therefore, no U.S. deferred income taxes were provided on such amounts at December 31, 2007. If it becomes apparent that some or all of the undistributed earnings will be distributed, Devon would then record taxes on those earnings.

 

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109. Interpretation No. 48 prescribes a threshold for recognizing the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by a taxing authority. Recognized tax positions are initially and subsequently measured as the largest amount of tax benefit that is more likely than not of being realized upon ultimate settlement with a taxing authority. Liabilities for unrecognized tax benefits related to such tax positions are included in other long-term liabilities unless the tax position is expected to be settled within the upcoming year, in which case the liabilities are included in accrued expenses and other current liabilities. Interest and penalties related to unrecognized tax benefits are included in income tax expense.

 

On January 1, 2007, Devon adopted Interpretation No. 48 and recorded an $11 million reduction to the January 1, 2007 balance of retained earnings related to unrecognized tax benefits. The $11 million included $8 million for related interest and penalties. An additional $3 million of liabilities were recorded with a corresponding increase to goodwill.

 

As a result of the adoption of Interpretation No. 48, certain liabilities included in income taxes payable and deferred income taxes were reclassified to other current and long-term liabilities in the accompanying balance sheet. The total $14 million increase in liabilities included a $17 million increase to long-term liabilities, partially offset by a $3 million reduction to current liabilities.

 

Additional information regarding Devon’s unrecognized tax benefits, including changes in such amounts during 2007, is provided in Note 12.

 

 

Devon is subject to current income taxes assessed by the federal
and various state jurisdictions in the United States and by
other foreign jurisdictions. In addition, Devon accounts for
deferred income taxes related to these jurisdictions using the
asset and liability method. Under this method, deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of assets and liabilities and their
respective tax bases. Deferred tax assets are also recognized
for the future tax benefits attributable to the expected
utilization of existing tax net operating loss carryforwards and
other types of carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences and carryforwards are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that
includes the enactment date.

 

At December 31, 2007, undistributed earnings of foreign
subsidiaries included in continuing operations were determined
to be permanently reinvested. Therefore, no U.S. deferred
income taxes were provided on such amounts at December 31,
2007. If it becomes apparent that some or all of the
undistributed earnings will be distributed, Devon would then
record taxes on those earnings.

 

In June 2006, the Financial Accounting Standards Board
(“FASB”) issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes — an
interpretation of FASB Statement No. 109.
Interpretation No. 48 prescribes a threshold for
recognizing the financial statement effects of a tax position
when it is more likely than not, based on the technical merits,
that the position will be sustained upon examination by a taxing
authority. Recognized tax positions are initially and
subsequently measured as the largest amount of tax benefit that
is more likely than not of being realized upon ultimate
settlement with a taxing authority. Liabilities for unrecognized
tax benefits related to such tax positions are included in other
long-term liabilities unless the tax position is expected to be
settled within the upcoming year, in which case the liabilities
are included in accrued expenses and other current liabilities.
Interest and penalties related to unrecognized tax benefits are
included in income tax expense.

 

On January 1, 2007, Devon adopted Interpretation
No. 48 and recorded an $11 million reduction to the
January 1, 2007 balance of retained earnings related to
unrecognized tax benefits. The $11 million included
$8 million for related interest and penalties. An
additional $3 million of liabilities were recorded with a
corresponding increase to goodwill.

 

As a result of the adoption of Interpretation No. 48,
certain liabilities included in income taxes payable and
deferred income taxes were reclassified to other current and
long-term liabilities in the accompanying balance sheet. The
total $14 million increase in liabilities included a
$17 million increase to long-term liabilities, partially
offset by a $3 million reduction to current liabilities.

 

Additional information regarding Devon’s unrecognized tax
benefits, including changes in such amounts during 2007, is
provided in Note 12.

 

 

Devon accounts for income taxes using the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases, as well as the future tax consequences attributable to the future utilization of existing tax net operating loss and other types of carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. At December 31, 2006, undistributed earnings of foreign subsidiaries were determined to be permanently reinvested. Therefore, no U.S. deferred income taxes were provided on such amounts at December 31, 2006. If it becomes apparent that some or all of the undistributed earnings will be distributed, Devon would then record taxes on those earnings.