Could Duke net $2.35B from international asset sale? Feb 12, 2016, 6:00am EST. Charlotte Business Journal

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1 Note to Acct 6120 class from instructor. (UNC Charlotte) There are three reasons for this post. First, I want to let you know that I have posted (on my course webpage) updated files for the Chapter 5 supplementary multiple-choice questions. The questions now match those in the Chapter 5 lecture materials handout, and the Excel solutions also match. Second, I want to give you a copy of the Business Journal List of Charlotte area accounting firms (see page 2 of this document). This list can be helpful for a student seeking a job, but it can also be helpful in a number of other ways. Third, I want to mention an article in the Business Journal last week (bottom of this page). The Charlotte business community is a business laboratory for a MACC Program. And we have a good lab, with many very fine companies to study. The article says that is considering selling some international operations for $2.35 billion. The author mentions that would not owe tax on the sale, because of net operating carryforwards, a topic we have been discussing. Here are some Thought Questions. (Partly about the short article below. Partly about selected items in s financial statements and tax footnotes-refer to page numbers at the bottom of the pages from the annual report reproduced in this document.) 1. Can you explain the federal income tax rule that might allow to realize a gain on a sale of those business operations, and avoid paying income tax on the gain? 2. Page 64 (of the Annual Report in this document) shows net income from operations of $4,134 million and income tax expense of $1,669 million in The statement show net income in the two preceding years as well. Can you explain why the company may have net operating losses from years in which it has been reporting profits? 3. Page 69 shows that the company paid income taxes of $72 million in 2012, received a tax refund of $202 million and paid $158 million in How does this relate to question no. 2 above? 4. Does the first page of the tax footnote (page 203) provide insight on how a company can report net profits and substantial income tax expense, while receiving tax refunds from the government? 5. What account on page 206 (deferred tax accounts) has the largest balance? Explain? 6. What liability account (Balance sheet on page 67) has the largest balance? Explain? 7. What is the deferred income tax item on the cash flow statement on page 68? Explain. 8. What amount of tax was paid by in each year (page 69)? Reconcile with question 2 above. 9. Can you explain the note on the bottom half of page 206 (change in NC income tax rate)? 10. Can you explain the note at the bottom of page 208 (Unrecognized Tax Benefits)? (lapse of S.O.L?) Could net $2.35B from international asset sale? Feb 12, 2016, 6:00am EST. Charlotte Business Journal Bernstein analyst Hugh Wynne calculates s Latin American operations could bring $2.35 billion, if goes through with a sale of the assets. He wrote last week that (NYSE:DUK) would probably be able to keep the full sale price as net proceeds. He says s net operating loss carry-forwards (which have reduced its U.S. taxes to zero in recent years) and its foreign and investment tax credits should mean it pays no U.S. taxes on the sale. The sale is contemplating involves only its assets in Latin America. also has a 25% stake in National Methanol, based in Saudi Arabia. That unit, says, would not be involved in any potential sale. (Remainder of article omitted).

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3 DUKE ENERGY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, (in millions, except per share amounts) Operating Revenues Regulated electric $21,550 $20,329 $15,515 Nonregulated electric, natural gas, and other 1,802 1,916 1,928 Regulated natural gas Total operating revenues 23,925 22,756 17,912 Operating Expenses Fuel used in electric generation and purchased power regulated 7,686 7,108 5,582 Fuel used in electric generation and purchased power nonregulated Cost of natural gas and other Operation, maintenance and other 5,856 5,673 4,787 Depreciation and amortization 3,066 2,668 2,145 Property and other taxes 1,213 1, Impairment charges Total operating expenses 18,683 17,886 15,011 Gains (Losses) on Sales of Other Assets and Other, net 16 (16) 10 Operating Income 5,258 4,854 2,911 Other Income and Expenses Equity in earnings of unconsolidated affiliates Gains on sales of unconsolidated affiliates Other income and expenses, net Total other income and expenses Interest Expense 1,622 1,543 1,244 Income From Continuing Operations Before Income Taxes 4,134 3,795 2,234 Income Tax Expense from Continuing Operations 1,669 1, Income From Continuing Operations 2,465 2,590 1,611 (Loss) Income From Discontinued Operations, net of tax (576) Net Income 1,889 2,676 1,782 Less: Net Income Attributable to Noncontrolling Interests Net Income Attributable to Corporation $ 1,883 $ 2,665 $ 1,768 Earnings Per Share Basic and Diluted Income from continuing operations attributable to Corporation common shareholders Basic $ 3.46 $ 3.64 $ 2.77 Diluted $ 3.46 $ 3.63 $ 2.77 (Loss) Income from discontinued operations attributable to Corporation common shareholders Basic $ (0.80) $ 0.13 $ 0.30 Diluted $ (0.80) $ 0.13 $ 0.30 Net Income attributable to Corporation common shareholders Basic $ 2.66 $ 3.77 $ 3.07 Diluted $ 2.66 $ 3.76 $ 3.07 Weighted-average shares outstanding Basic Diluted See Notes to Consolidated Financial Statements 64

4 DUKE ENERGY CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years Ended December 31, Net Income $ 1,889 $2,676 $1,782 Other Comprehensive Loss, net of tax Foreign currency translation adjustments (124) (197) (75) Pension and OPEB adjustments (a) Net unrealized (losses) gains on cash flow hedges (b) (26) 59 (28) Reclassification into earnings from cash flow hedges 7 1 (1) Unrealized gains (losses) on investments in available-for-sale securities 3 (4) 14 Reclassification into earnings from available-for-sale securities 4 (5) Other Comprehensive Loss, net of tax (136) (99) (76) Comprehensive Income 1,753 2,577 1,706 Less: Comprehensive Income Attributable to Noncontrolling Interests Comprehensive Income Attributable to Corporation $ 1,739 $2,572 $1,696 (a) Net of insignificant tax expense in 2014, $17 million tax expense in 2013 and $9 million tax expense in See Note 21 for additional information. (b) Net of $13 million tax benefit in 2014, $20 million tax expense in 2013 and $6 million tax expense in See Notes to Consolidated Financial Statements 65

5 DUKE ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS December 31, ASSETS Current Assets Cash and cash equivalents $ 2,036 $ 1,501 Short-term investments 44 Receivables (net of allowance for doubtful accounts of $17 at December 31, 2014 and $30 at December 31, 2013) 791 1,286 Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $51 at December 31, 2014 and $43 at December 31, 2013) 1,973 1,719 Inventory 3,459 3,250 Assets held for sale 364 Regulatory assets 1, Other 1,837 1,821 Total current assets 11,575 10,516 Investments and Other Assets Investments in equity method unconsolidated affiliates Nuclear decommissioning trust funds 5,546 5,132 Goodwill 16,321 16,340 Assets held for sale 2, Other 3,008 3,432 Total investments and other assets 27,875 25,401 Property, Plant and Equipment Cost 104, ,115 Accumulated depreciation and amortization (34,824) (33,625) Generation facilities to be retired, net 9 Net property, plant and equipment 70,046 69,490 Regulatory Assets and Deferred Debits Regulatory assets 11,042 9,191 Other Total regulatory assets and deferred debits 11,213 9,372 Total Assets $120,709 $ 114,779 See Notes to Consolidated Financial Statements 66

6 DUKE ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS (Continued) December 31, LIABILITIES AND EQUITY Current Liabilities Accounts payable $ 2,271 $ 2,391 Notes payable and commercial paper 2, Taxes accrued Interest accrued Current maturities of long-term debt 2,807 2,104 Liabilities associated with assets held for sale Regulatory liabilities Other 2,188 1,996 Total current liabilities 11,233 8,644 Long-Term Debt 37,213 38,152 Deferred Credits and Other Liabilities Deferred income taxes 13,423 12,097 Investment tax credits Accrued pension and other post-retirement benefit costs 1,145 1,322 Liabilities associated with assets held for sale Asset retirement obligations 8,466 4,950 Regulatory liabilities 6,193 5,949 Other 1,675 1,749 Total deferred credits and other liabilities 31,364 26,575 Commitments and Contingencies Equity Common stock, $0.001 par value, 2 billion shares authorized; 707 million and 706 million shares outstanding at December 31, 2014 and 2013, respectively 1 1 Additional paid-in capital 39,405 39,365 Retained earnings 2,012 2,363 Accumulated other comprehensive loss (543) (399) Total Corporation shareholders equity 40,875 41,330 Noncontrolling interests Total equity 40,899 41,408 Total Liabilities and Equity $120,709 $ 114,779 See Notes to Consolidated Financial Statements 67

7 DUKE ENERGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,889 $ 2,676 $ 1,782 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and accretion (including amortization of nuclear fuel) 3,507 3,229 2,652 Equity component of AFUDC (135) (157) (300) Severance expense 92 FERC mitigation costs (15) 117 Community support and charitable contributions expense Gains on sales of other assets (33) (79) (44) Impairment charges Deferred income taxes 1,149 1, Equity in earnings of unconsolidated affiliates (130) (122) (148) Voluntary opportunity cost deferral (101) Accrued pension and other post-retirement benefit costs Contributions to qualified pension plans (250) (304) (Increase) decrease in Net realized and unrealized mark-to-market and hedging transactions Receivables 58 (281) 39 Inventory (269) (31) (258) Other current assets (414) (35) 140 Increase (decrease) in Accounts payable (30) Taxes accrued (14) 77 (142) Other current liabilities (201) Other assets 16 (384) (129) Other liabilities 141 (364) (139) Net cash provided by operating activities 6,586 6,382 5,244 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (5,384) (5,526) (5,501) Investment expenditures (90) (81) (6) Acquisitions (54) (451) Cash acquired from the merger with 71 Purchases of available-for-sale securities (4,110) (6,142) (4,719) Proceeds from sales and maturities of available-for-sale securities 4,133 6,315 4,537 Net proceeds from the sales of equity investments and other assets, and sales of and collections on notes receivable Change in restricted cash (414) Other (56) Net cash used in investing activities (5,373) (4,978) (6,197) See Notes to Consolidated Financial Statements 68

8 DUKE ENERGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Years Ended December 31, CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the: Issuance of long-term debt $ 2,914 $ 3,601 $ 4,170 Issuance of common stock related to employee benefit plans Payments for the: Redemption of long-term debt (3,037) (2,761) (2,498) Redemption of preferred stock of a subsidiary (96) Proceeds from the issuance of short-term debt with original maturities greater than 90 days 1,066 Payments for the redemption of short-term debt with original maturities greater than 90 days (564) Notes payable and commercial paper 1, Distributions to noncontrolling interests (65) (15) (25) Contributions from noncontrolling interests 9 76 Dividends paid (2,234) (2,188) (1,752) Other (5) Net cash (used in) provided by financing activities (678) (1,327) 267 Net increase (decrease) in cash and cash equivalents (686) Cash and cash equivalents at beginning of period 1,501 1,424 2,110 Cash and cash equivalents at end of period $ 2,036 $ 1,501 $ 1,424 Supplemental Disclosures: Cash paid for interest, net of amount capitalized $ 1,659 $ 1,665 $ 1,032 Cash paid for (received from) income taxes 158 (202) 72 Merger with Fair value of assets acquired 48,944 Fair value of liabilities assumed 30,873 Issuance of common stock 18,071 Significant non-cash transactions: Accrued capital expenditures See Notes to Consolidated Financial Statements 69

9 DUKE ENERGY CORPORATION DUKE ENERGY CAROLINAS, LLC PROGRESS ENERGY, INC. DUKE ENERGY PROGRESS, INC. DUKE ENERGY FLORIDA, INC. DUKE ENERGY OHIO, INC. DUKE ENERGY INDIANA, INC. Combined Notes to Consolidated Financial Statements (Continued) The following table includes pretax employer matching contributions made by and expensed by the Subsidiary Registrants. Years ended December 31, 2014 (a) $143 $47 $43 $30 $14 $3 $ (a) For 2014, amounts include the additional employer contribution of 4 percent of eligible pay per pay period for employees not eligible to participate in a defined benefit plan. 22. INCOME TAXES INCOME TAX EXPENSE Components of Income Tax Expense Year Ended December 31, 2014 Current income taxes Federal $ $ 161 $ (466) $(184) $ (53) $ (73) $(112) State (8) Foreign 144 Total current income taxes (474) (170) (52) (70) (111) Deferred income taxes Federal 1, State 35 (25) Foreign (67) Total deferred income taxes (a)(b) 1, , Investment tax credit amortization (16) (6) (8) (6) (1) (1) (1) Income tax expense from continuing operations 1, Tax benefit from discontinued operations (295) (4) (300) Total income tax expense included in Consolidated Statements of Operations $ 1,374 $ 588 $ 536 $ 285 $349 $(257) $ 197 (a) There were no benefits of net operating loss (NOL) carryforwards. (b) Includes utilization of NOL and tax credit carryforwards of $1,544 million at, $345 million at, $530 million at, $291 million at, $64 million at, $56 million at and $141 million at. 203

10 DUKE ENERGY CORPORATION DUKE ENERGY CAROLINAS, LLC PROGRESS ENERGY, INC. DUKE ENERGY PROGRESS, INC. DUKE ENERGY FLORIDA, INC. DUKE ENERGY OHIO, INC. DUKE ENERGY INDIANA, INC. Combined Notes to Consolidated Financial Statements (Continued) Year Ended December 31, 2013 Current income taxes Federal $ (141) $ 49 $ (221) $ (70) $(143) $ (24) $ (88) State (40) 11 (37) (10) (13) (4) 7 Foreign 151 Total current income taxes (30) 60 (258) (80) (156) (28) (81) Deferred income taxes Federal 1, State Foreign 14 Total deferred income taxes (a) 1, Investment tax credit amortization (15) (5) (8) (7) (1) (1) Income tax expense from continuing operations 1, Tax expense from discontinued operations 29 (26) 32 Total income tax expense included in Consolidated Statements of Operations $ 1,234 $ 594 $ 347 $ 288 $ 213 $ 75 $ 223 (a) Includes benefits of NOL carryforwards of $808 million at, $458 million at, $64 million at, $301 million at and $179 million at. Year Ended December 31, 2012 Current income taxes Federal $ (108) $ (1) $ (88) $ (48) $ 6 $ (8) $ (27) State 29 (25) 2 (6) 5 27 Foreign 133 Total current income taxes 54 (26) (86) (54) 6 (3) Deferred income taxes Federal (47) State (2) (25) Foreign 20 Total deferred income taxes (a) (72) Investment tax credit amortization (13) (6) (8) (7) (1) (2) (1) Income tax expense (benefit) from continuing operations (73) Tax benefit from discontinued operations Total income tax expense (benefit) included in Consolidated Statements of Operations $ 730 $ 453 $ 201 $ 110 $147 $ 98 $ (73) (a) Includes benefits of NOL carryforwards of $1,062 million at, $245 million at, $357 million at, $257 million at, $25 million at, $34 million at and $205 million at. Income from Continuing Operations before Income Taxes Years Ended December 31, Domestic $ 3,600 $ 3,183 $1,600 Foreign Income from continuing operations before income taxes $ 4,134 $ 3,795 $2,

11 DUKE ENERGY CORPORATION DUKE ENERGY CAROLINAS, LLC PROGRESS ENERGY, INC. DUKE ENERGY PROGRESS, INC. DUKE ENERGY FLORIDA, INC. DUKE ENERGY OHIO, INC. DUKE ENERGY INDIANA, INC. Combined Notes to Consolidated Financial Statements (Continued) Statutory Rate Reconciliation The following tables present a reconciliation of income tax expense at the U.S. federal statutory tax rate to the actual tax expense from continuing operations. Year Ended December 31, 2014 Income tax expense, computed at the statutory rate of 35 percent $ 1,447 $ 581 $ 497 $ 263 $ 314 $ 39 $ 195 State income tax, net of federal income tax effect Tax differential on foreign earnings (a) (110) AFUDC equity income (47) (32) (9) (9) (1) (5) Renewable energy production tax credits (67) International tax dividend 373 Other items, net (3) Income tax expense from continuing operations $ 1,669 $ 588 $ 540 $ 285 $ 349 $ 43 $ 197 Effective tax rate 40.4% 35.4% 38.0% 37.9% 38.9% 38.9% 35.5% (a) Includes a $57 million benefit as a result of the merger of two Chilean subsidiaries and a change in income tax rates in various countries primarily relating to Peru. During the fourth quarter of 2014, declared a taxable dividend of foreign earnings in the form of notes payable that will result in the repatriation of approximately $2.7 billion of cash held and expected to be generated by International over a period of up to 8 years. As a result of the decision to repatriate all cumulative historical undistributed foreign earnings, during the fourth quarter of 2014, recorded U.S. income tax expense of approximately $373 million. s intention is to indefinitely reinvest prospective undistributed earnings generated by s foreign subsidiaries, and accordingly U.S. deferred taxes will not be provided for those earnings. Year Ended December 31, 2013 Income tax expense, computed at the statutory rate of 35 percent $ 1,328 $ 549 $ 361 $ 276 $ 188 $ 39 $ 203 State income tax, net of federal income tax effect Tax differential on foreign earnings (49) AFUDC equity income (55) (32) (18) (15) (3) (5) Renewable energy production tax credits (62) Other items, net (23) 21 (1) (4) Income tax expense (benefit) from continuing operations $ 1,205 $ 594 $ 373 $ 288 $ 213 $ 43 $ 223 Effective tax rate 31.8% 37.8% 36.2% 36.5% 39.6% 39.1% 38.4% Year Ended December 31, 2012 Income tax expense, computed at the statutory rate of 35 percent $ 782 $ 461 $ 185 $ 134 $ 145 $ 27 $ (43) State income tax, net of federal income tax effect Tax differential on foreign earnings (69) AFUDC equity income (101) (54) (37) (24) (13) (2) (26) Renewable energy production tax credits (25) Other items, net (29) 12 (9) (1) 1 6 (5) Income tax expense from continuing operations $ 623 $ 453 $ 172 $ 110 $ 147 $ 33 $ (73) Effective tax rate 27.9% 34.3% 32.7% 28.7% 35.7% 42.9% 59.5% 205

12 DUKE ENERGY CORPORATION DUKE ENERGY CAROLINAS, LLC PROGRESS ENERGY, INC. DUKE ENERGY PROGRESS, INC. DUKE ENERGY FLORIDA, INC. DUKE ENERGY OHIO, INC. DUKE ENERGY INDIANA, INC. Combined Notes to Consolidated Financial Statements (Continued) Valuation allowances have been established for certain foreign and state NOL carryforwards and state income tax credits that reduce deferred tax assets to an amount that will be realized on a more-likely-than-not basis. The net change in the total valuation allowance is included in Tax differential on foreign earnings and State income tax, net of federal income tax effect in the above tables. DEFERRED TAXES Net Deferred Income Tax Liability Components December 31, 2014 Deferred credits and other liabilities $ 188 $ 53 $ 108 $ 28 $ 78 $ (8) $ 12 Capital lease obligations Pension, post-retirement and other employee benefits merger purchase accounting adjustments (a) 1,124 Tax credits and NOL carryforwards 3, Investments and other assets 14 Other Valuation allowance (184) (13) (1) Total deferred income tax assets 5, , Investments and other assets (1,625) (1,051) (427) (232) (245) (4) Accelerated depreciation rates (11,715) (4,046) (3,284) (2,030) (1,252) (1,660) (1,603) Regulatory assets and deferred debits (3,694) (953) (1,602) (809) (792) (141) (106) Other (44) (151) (246) Total deferred income tax liabilities (17,078) (6,050) (5,464) (3,071) (2,535) (1,801) (1,713) Net deferred income tax liabilities $(11,801) $(5,814) $(4,201) $(2,802) $(2,112) $(1,705) $(1,385) (a) Primarily related to capital lease obligations and debt fair value adjustments. On July 23, 2013, HB 998 was signed into law. HB 998 reduces the North Carolina corporate income tax rate from a statutory 6.9 to 6.0 percent in January 2014 with a further reduction to 5.0 percent in January recorded a net reduction of approximately $145 million to its North Carolina deferred tax liability in the third quarter of The significant majority of this deferred tax liability reduction was offset by recording a regulatory liability pending NCUC determination of the disposition of the amounts related to and. The impact of HB 998 did not have a significant impact on the financial position, results of operation, or cash flows of,, or. The following table presents the expiration of tax credits and NOL carryforwards. December 31, 2014 Amount Expiration Year Investment tax credits $ Alternative minimum tax credits 1,093 Indefinite Federal NOL carryforwards State NOL carryforwards and credits (a) Foreign NOL carryforwards (b) Foreign Tax Credits Total tax credits and NOL carryforwards $ 3,540 (a) A valuation allowance of $79 million has been recorded on the state Net Operating Loss carryforwards, as presented in the Net Deferred Income Tax Liability Components table. (b) A valuation allowance of $105 million has been recorded on the foreign Net Operating Loss carryforwards, as presented in the Net Deferred Income Tax Liability Components table. 206

13 DUKE ENERGY CORPORATION DUKE ENERGY CAROLINAS, LLC PROGRESS ENERGY, INC. DUKE ENERGY PROGRESS, INC. DUKE ENERGY FLORIDA, INC. DUKE ENERGY OHIO, INC. DUKE ENERGY INDIANA, INC. Combined Notes to Consolidated Financial Statements (Continued) December 31, 2013 Deferred credits and other liabilities $ 245 $ 56 $ 136 $ 9 $ 96 $ (13) $ 9 Capital lease obligations (2) Pension, post-retirement and other employee benefits merger purchase accounting adjustments (a) 1,184 Tax credits and NOL carryforwards 4, , Other Valuation allowance (192) (40) (1) Total deferred income tax assets 6, , Investments and other assets (1,396) (999) (209) (160) (49) (17) (7) Accelerated depreciation rates (12,615) (4,400) (3,663) (2,528) (1,160) (1,937) (1,591) Regulatory assets and deferred debits (3,185) (609) (1,389) (202) (1,159) (168) (117) Total deferred income tax liabilities (17,196) (6,008) (5,261) (2,890) (2,368) (2,122) (1,715) Net deferred income tax liabilities $(10,679) $(5,420) $(2,743) $(2,328) $(1,719) $(1,927) $(1,119) (a) Primarily related to capital lease obligations and debt fair value adjustments. Classification of Deferred Tax Assets (Liabilities) in the Consolidated Balance Sheets December 31, 2014 Current Assets: Other $ 1,593 $ 3 $ 558 $ 106 $ 340 $ 60 $ 206 Investments and Other Assets: Other 29 Current Liabilities: Other (5) Deferred Credits and Other Liabilities: Other (13,423) (5,812) (4,759) (2,908) (2,452) (1,765) (1,591) Net deferred income tax liabilities $(11,801) $(5,814) $(4,201) $(2,802) $(2,112) $(1,705) $(1,385) December 31, 2013 Current Assets: Other $ 1,373 $ 286 $ 540 $ 229 $ 110 $ 85 $ 52 Investments and Other Assets: Other 45 Deferred Credits and Other Liabilities: Other (12,097) (5,706) (3,283) (2,557) (1,829) (2,012) (1,171) Net deferred income tax liabilities $ (10,679) $(5,420) $ (2,743) $(2,328) $(1,719) $(1,927) $(1,119) 207

14 DUKE ENERGY CORPORATION DUKE ENERGY CAROLINAS, LLC PROGRESS ENERGY, INC. DUKE ENERGY PROGRESS, INC. DUKE ENERGY FLORIDA, INC. DUKE ENERGY OHIO, INC. DUKE ENERGY INDIANA, INC. Combined Notes to Consolidated Financial Statements (Continued) UNRECOGNIZED TAX BENEFITS The following tables present changes to unrecognized tax benefits. Year Ended December 31, 2014 Unrecognized tax benefits January 1 $ 230 $ 171 $ 32 $ 22 $ 8 $ 1 Unrecognized tax benefits increases (decreases) Gross increases tax positions in prior periods 1 1 Gross decreases tax positions in prior periods (2) Decreases due to settlements (15) (11) (1) Total changes (17) (11) 1 Unrecognized tax benefits December 31 $ 213 $ 160 $ 32 $ 23 $ 8 $ 1 Year Ended December 31, 2013 Unrecognized tax benefits January 1 $ 540 $ 271 $ 131 $ 67 $ 44 $ 36 $ 32 Unrecognized tax benefits (decreases) increases Gross decreases tax positions in prior periods (231) (100) (86) (45) (37) (36) (31) Decreases due to settlements (66) Reduction due to lapse of statute of limitations (13) (13) 1 Total changes (310) (100) (99) (45) (36) (36) (31) Unrecognized tax benefits December 31 $ 230 $ 171 $ 32 $ 22 $ 8 $ $ 1 Year Ended December 31, 2012 Unrecognized tax benefits January 1 $ 385 $ 260 $ 173 $ 73 $ 80 $ 32 $ 24 Acquisitions 128 Unrecognized tax benefits increases (decreases) Gross increases tax positions in prior periods Gross decreases tax positions in prior periods (4) (72) (19) (52) Gross increases current period tax positions Gross decreases current period tax positions (9) (5) (1) (1) (2) (2) Decreases due to settlements (13) (11) Reduction due to lapse of statute of limitations (4) Total changes (42) (6) (36) 4 8 Unrecognized tax benefits December 31 $ 540 $ 271 $ 131 $ 67 $ 44 $ 36 $ 32 The following table includes additional information regarding the Registrants unrecognized tax benefits. It is reasonably possible that and will reflect an approximate $28 million reduction, will reflect an approximate $17 million reduction, and will reflect an approximate $7 million reduction in unrecognized tax benefits within the next 12 months due to the expected lapse of the statute of limitations. All other Registrants do not anticipate a material increase or decrease in unrecognized tax benefits within the next 12 months. 208