Pfizer Inc. (PFE) | Analysis of Income Taxes

Income Tax Accounting Policy

Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates and laws. Pfizer provides a valuation allowance when believes that deferred tax assets are not recoverable based on an assessment of estimated future taxable income that incorporates ongoing, prudent and feasible tax-planning strategies.

Pfizer accounts for income tax contingencies using a benefit recognition model. If Pfizer considers that a tax position is more likely than not to be sustained upon audit, based solely on the technical merits of the position, Pfizer recognizes the benefit. Pfizer measures the benefit by determining the amount that is greater than 50% likely of being realized upon settlement, presuming that the tax position is examined by the appropriate taxing authority that has full knowledge of all relevant information.

Under the benefit recognition model, if initial assessment fails to result in the recognition of a tax benefit, Pfizer regularly monitors position and subsequently recognize the tax benefit: (i) if there are changes in tax law, analogous case law or there is new information that sufficiently raise the likelihood of prevailing on the technical merits of the position to more likely than not; (ii) if the statute of limitations expires; or (iii) if there is a completion of an audit resulting in a favorable settlement of that tax year with the appropriate agency. Pfizer regularly re-evaluates tax positions based on the results of audits of federal, state and foreign income tax filings, statute of limitations expirations, changes in tax law or receipt of new information that would either increase or decrease the technical merits of a position relative to the "more-likely-than-not" standard. Liabilities associated with uncertain tax positions are classified as current only when Pfizer expects to pay cash within the next 12 months. Interest and penalties, if any, are recorded in Provision for taxes on income and are classified on Pfizer's consolidated balance sheet with the related tax liability.

Amounts recorded for valuation allowances and income tax contingencies can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions. For information about the risks associated with estimates and assumptions.

Source: Pfizer Inc., Annual Report

Income Tax Expense (Benefit)

Pfizer Inc., income tax expense (benefit), continuing operations

Source: Based on data from Pfizer Inc. Annual Reports

Item	Description	The company
Current income taxes	The component of income tax expense for the period representing amounts of income taxes paid or payable (or refundable) for the period for all income tax obligations as determined by applying the provisions of relevant enacted tax laws to relevant amounts of taxable income (loss) from continuing operations.	Pfizer Inc.'s current income taxes declined from 2009 to 2010 but then slightly increased from 2010 to 2011.
Deferred income taxes	The component of income tax expense for the period representing the net change in the entity's deferred tax assets and liabilities pertaining to continuing operations.	Pfizer Inc.'s deferred income taxes increased from 2009 to 2010 but then slightly declined from 2010 to 2011.
Provision for taxes on income	The sum of the current income tax expense (benefit) and the deferred income tax expense (benefit) pertaining to pretax income (loss) from continuing operations; income tax expense (benefit) may include interest and penalties on tax uncertainties based on the entity's accounting policy.	Pfizer Inc.'s provision for taxes on income declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.

Effective Income Tax Rate (EITR)

Pfizer Inc., effective income tax rate (EITR) reconciliation

Source: Based on data from Pfizer Inc. Annual Reports

Item	Description	The company
Effective tax rate for income from continuing operations	A ratio calculated by dividing the reported amount of income tax expense attributable to continuing operations for the period by GAAP-basis pretax income from continuing operations.	Pfizer Inc.'s effective tax rate for income from continuing operations declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.

Deferred Tax Assets (Liabilities), Net

Pfizer Inc., deferred tax assets (liabilities), net

Source: Based on data from Pfizer Inc. Annual Reports

Item	Description	The company
Gross deferred tax assets	The sum of the tax effects as of the balance sheet date of the amounts of all future tax deductions arising from temporary differences between tax basis and generally accepted accounting principles basis recognition of assets, liabilities, revenues and expenses, which can only be deducted for tax purposes when permitted under enacted tax laws (before the valuation allowance, if any, to reduce such sum amount to net realizable value). Includes any tax benefit realized in deferred tax assets for significant impacts of tax planning strategies.	Pfizer Inc.'s gross deferred tax assets declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.
Deferred tax assets	The aggregate tax effects as of the balance sheet date of all future tax deductions arising from temporary differences between tax basis and generally accepted accounting principles basis recognition of assets, liabilities, revenues and expenses, which can only be deducted for tax purposes when permitted under enacted tax laws; net of deducting the allocated valuation allowance, if any, to reduce such amount to net realizable value.	Pfizer Inc.'s deferred tax assets declined from 2009 to 2010 but then slightly increased from 2010 to 2011.
Net deferred tax asset (liability)	For entities that net deferred tax assets and tax liabilities, represents the unclassified net amount of deferred tax assets and liabilities as of the balance sheet date, which result from applying the applicable enacted tax rate to net temporary differences and carryforwards pertaining to assets or liabilities. A temporary difference is a difference between the tax basis of an asset or liability and its carrying amount in the financial statements prepared in accordance with generally accepted accounting principles that will reverse in ensuing periods.	Pfizer Inc.'s net deferred tax asset (liability) declined from 2009 to 2010 and from 2010 to 2011.