SEC Filings


10-K
CUMMINS INC filed this Form 10-K on 02/11/2019
Entire Document
 

A reconciliation of unrecognized tax benefits for the years ended December 31, 2018, 2017 and 2016 was as follows:
 
 
December 31,
In millions
 
2018
 
2017
 
2016
Balance at beginning of year
 
$
41

 
$
59

 
$
135

Additions to current year tax positions
 
10

 
11

 
10

Additions to prior years' tax positions
 
27

 
9

 
18

Reductions to prior years' tax positions
 
(2
)
 
(3
)
 

Reductions for tax positions due to settlements with taxing authorities
 
(5
)
 
(35
)
 
(104
)
Balance at end of year
 
$
71

 
$
41

 
$
59


Included in the December 31, 2018, 2017 and 2016, balances are $62 million, $32 million and $31 million, respectively, related to tax positions that, if released, would favorably impact the effective tax rate in future periods. We have also accrued interest expense related to the unrecognized tax benefits of $4 million, $4 million and $3 million as of December 31, 2018, 2017 and 2016, respectively. We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.
Audit outcomes and the timing of audit settlements are subject to significant uncertainty. Although we believe that adequate provision has been made for such issues, there is the possibility that the ultimate resolution of such issues could have an adverse effect on our earnings. Conversely, if these issues are resolved favorably in the future, the related provision would be reduced, thus having a positive impact on earnings.
As a result of our global operations, we file income tax returns in various jurisdictions including U.S. federal, state and foreign jurisdictions. We are routinely subject to examination by taxing authorities throughout the world, including Australia, Belgium, Brazil, Canada, China, France, India, Mexico, the United Kingdom (U.K.) and the U.S. With few exceptions, our U.S. federal, major state and foreign jurisdictions are no longer subject to income tax assessments for years before 2014.

NOTE 5. MARKETABLE SECURITIES
A summary of marketable securities, all of which are classified as current, was as follows:
 
 
December 31,
 
 
2018
 
2017
In millions
 
Cost
 
Gross unrealized gains/(losses) (1)
 
Estimated
fair value
 
Cost
 
Gross unrealized gains/(losses) (1)
 
Estimated
fair value
Equity securities
 
 

 
 

 
 

 
 

 
 

 
 

Debt mutual funds
 
$
103

 
$
1

 
$
104

 
$
170

 
$

 
$
170

Certificates of deposit
 
101

 

 
101

 
12

 

 
12

Equity mutual funds
 
16

 

 
16

 
12

 
3

 
15

Debt securities
 
1

 

 
1

 
1

 

 
1

Total marketable securities
 
$
221

 
$
1

 
$
222

 
$
195

 
$
3

 
$
198


______________________________________________________
(1) Unrealized gains and losses for debt securities are recorded in other comprehensive income (See NOTE 15, "ACCUMULATED OTHER COMPREHENSIVE LOSS," to our Consolidated Financial Statements for more information). Effective January 1, 2018, with the adoption of the new FASB standard, all unrealized gains and losses for equity securities are recorded in "Other income, net" in the Consolidated Statements of Income. See NOTE 1, "RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS," for detailed information about the adoption of this standard.

Effective January 1, 2018 and forward, only debt securities are classified as "held-to-maturity," "available-for-sale" or "trading". Only debt securities at December 31, 2018 are classified as available-for-sale securities, while all equity and debt securities at December 31, 2017, are classified as available-for-sale securities. All marketable securities presented use a Level 2 fair value measure. The fair value of Level 2 securities is estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 securities and there were no transfers between Level 2 or 3 during 2018 or 2017.

86