Investor Presentaiton
At December 31, 2022, Eaton Corporation plc and its foreign subsidiaries had income tax loss carryforwards and income tax
credit carryforwards that are available to reduce future taxable income or tax liabilities. These carryforwards and their
respective expiration dates are summarized below:
(In millions)
2023
2028
through through
2027
2032
2033
2038
through through
2037
2047
Not
subject to Valuation
expiration allowance
Ireland income tax loss carryforwards
$
8 $
Ireland deferred income tax assets for income tax loss
carryforwards
(1)
Foreign income tax loss carryforwards
79
7,277
11,478
170
2,372
Foreign deferred income tax assets for income tax loss
carryforwards
20
661
2,867
49
568
(4,034)
Foreign deferred income tax assets for income tax loss
carryforwards after ASU 2013-11
11
658
2,867
49
566
(4,034)
Foreign income tax credit carryforwards
190
67
52
3
31
(149)
Foreign income tax credit carryforwards after ASU
2013-11
159
38
49
3
31
(149)
Recoverability of Deferred Income Tax Assets
Eaton is subject to the income tax laws in the jurisdictions in which it operates. In order to determine its income tax
provision for financial statement purposes, Eaton must make significant estimates and judgments about its business operations
in these jurisdictions. These estimates and judgments are also used in determining the deferred income tax assets and liabilities
that have been recognized for differences between the financial statement and income tax basis of assets and liabilities, and
income tax loss carryforwards and income tax credit carryforwards.
Management evaluates the realizability of deferred income tax assets for each of the jurisdictions in which it operates. If the
Company experiences cumulative pre-tax income in a particular jurisdiction in the three-year period including the current and
prior two years, management normally concludes that the deferred income tax assets will more likely than not be realizable and
no valuation allowance is recognized, unless known or planned operating developments, or changes in tax laws, would lead
management to conclude otherwise. However, if the Company experiences cumulative pre-tax losses in a particular jurisdiction
in the three-year period including the current and prior two years, management then considers a series of factors in the
determination of whether the deferred income tax assets can be realized. These factors include historical operating results,
known or planned operating developments, the period of time over which certain temporary differences will reverse,
consideration of the utilization of certain deferred income tax liabilities, carryback capability under the tax law in the particular
country, prudent and feasible tax planning strategies, changes in tax laws, and estimates of future earnings and taxable income
using the same assumptions as those used for the Company's goodwill and other impairment testing. After evaluation of these
factors, if the deferred income tax assets are expected to be realized within the tax carryforward period allowed for that specific
country, management would conclude that no valuation allowance would be required. To the extent that the deferred income tax
assets exceed the amount that is expected to be realized within the tax carryforward period for a particular jurisdiction,
management would establish a valuation allowance.
Applying the above methodology, valuation allowances have been established for certain deferred income tax assets to the
extent they are not expected to be realized within the particular tax carryforward period.
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