Seigel & Associates Releases
The 2008 Full Year Update of
The Seigel Tax Reserve Report

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The Report, which is issued quarterly, provides comprehensive analysis and review of tax reserve disclosures and financial data contained in the financial statements of major corporations filed with their SEC annual reports.

The 2008 full year update of the Report covers 790 corporations that have annual revenues of $2 billion or more that filed their SEC reports during the 2008. Subsequent Reports will cover annual SEC reports filed by the same revenue sized corporations during the applicable quarter.

In the Report, we have evaluated the extent and quality of FIN 48 disclosures made by these corporations on a company-by-company basis and assign each a Seigel Index score reflecting the degree of satisfactory compliance with FIN 48’s disclosure mandates. The Report also contains significant quantitative data dealing with tax reserves and related financial information.

The Executive Summary appears below:

I. Overall Data

This full year update of The Seigel Tax Reserve Report reviews the cumulative FIN 48 data in the financial statements of the 790 public companies with revenues of at least $2 billion that filed annual reports with the SEC in 2008.

The 601 companies that reported in the first quarter were discussed in the First Quarter Report. The 69 companies that reported in the second quarter were discussed in the Second Quarter Report, along with analysis of the cumulative reporting for the 670 companies. The 54 companies that reported in the third quarter were discussed in the Third Quarter Report, along with analysis of the cumulative reporting for the 724 companies. 66 companies reported in the fourth quarter bringing the total number of companies covered in this full year update to 790.

The reporting companies had aggregate revenues of $10.4 trillion and total assets of $26.8 trillion. The 66 companies added during the fourth quarter had aggregate revenues of $697 billion and total assets of $582 billion. We note and discuss fourth quarter data where it differs markedly from patterns established in the first three quarters of the year.

Because the 724 companies reporting in the first three quarters represent 92% of the total 790 companies, the incremental changes to the data by fourth quarter reporting companies are relatively immaterial. The greatest change is a dramatically lower Seigel Index by fourth quarter companies. Their score of 82.1 reduced the previous three-quarter aggregate Seigel Index of 91.3 to 90.4. Otherwise, in most cases, the relationships and patterns that we observed established in the first three quarters reflect those seen for the full year.

For the 790 reporting companies:

Aggregate annual revenues were $10.4 trillion and assets were $26.8 trillion.

Total tax reserves were $189 billion and median tax reserves were $55 million.

Total tax reserves represented 1.8% of revenues and 0.7% of assets.

The median ratio of tax reserves to revenues was 0.9% and to assets was 0.7%.

Adoption of FIN 48 increased total tax reserves by $2.3 billion. The median impact on
    tax reserves was $0.1 million.

Adoption of FIN 48 decreased shareholders’ equity by $2.8 billion. The median decrease
    was $0.5 million.

Total tax reserves at reporting companies decreased $740 million during the year.

The net increase in tax reserves due to the adoption of FIN 48 plus changes during the
    fiscal year totaled $1.6 billion with a median decrease of $2.3 million.

The 66 companies added during the third quarter represent 8% of the total number of reporting companies for 2008, so, as previously noted, with the exception of their impact on the Seigel Index their overall impact is relatively minor. For these 66 companies:

Aggregate annual revenues were $697 billion and assets were $582 billion.

Total tax reserves were $8.4 billion and median tax reserves were $35 million.

Total tax reserves represented 1.2% of revenues and 1.4% of assets.

The median ratio of tax reserves to revenues was 0.5% and to assets was 0.8%.

Adoption of FIN 48 decreased total tax reserves by $877 million. The median increase
    in tax reserves was $1.1 million.

Adoption of FIN 48 increased shareholders’ equity by $911 million. The median impact
    was a decrease of $1.2 million.

Total tax reserves decreased $104 million during the year with a median increase of
    $0.9 million.

The net decrease in tax reserves due to the adoption of FIN 48 plus changes during
    the fiscal year totaled $980 million with a median increase of $3.2 million.

II. Disclosure Compliance

On an overall basis the 790 reporting companies had a Seigel Index of 90.4. This is a drop from the first three quarters, where the Seigel Index was 91.3. On a relative basis, along nearly every dimension of disclosure quality, the fourth quarter companies were significant underperformers. For the full year, there were 301 instances of companies that failed to provide some information that is required by FIN 48 (some companies failed in multiple areas). Of these, 56 instances were by fourth quarter reporting companies – 19% of the total even though the 66 fourth quarter companies represent only 8% of all the reporting companies.

533 companies (67%) attained a Seigel Index score of at least 100, denoting
    satisfactory compliance with FIN 48’s disclosure requirements. 257, or 33%, did not.

Companies were grouped into 5 segments by revenue size . No revenue group attained
    a Seigel Index of 100.

By revenue size, the largest companies – those with revenues of at least $25 billion –
    had the best Seigel Index score of about 94.

Smaller revenue sized companies – those in the $2 billion to $5 billion range – had the
    lowest Seigel Index score of 89.

Companies were also grouped into 38 segments by industry . The Seigel Index scores,
    by industry, ranged from a high of 102.3 to a low of 61.8.

By industry, only 7 of 38 industries attained a Seigel Index of 100 or better.

11 industries failed to earn a Seigel Index of at least 90.

The greatest area of noncompliance was the failure to disclose the total amount of
    interest and penalties expensed in the current year, where 1 of every 8 companies
    failed to provide any disclosure. In the fourth quarter alone 42% of companies failed to
    provide this information. Previously, the greatest area of non-compliance related to the
    “12-month look-forward” rule of FIN 48.

III. Quantitative Tax Reserve Data

The analysis of the data disclosed by the reporting companies reveals that:

The result of the adoption of FIN 48 was: 397 companies increased their tax reserves
    by a total of $11.0 billion with a median increase of $7.3 million; 193 companies
    decreased their tax reserves by a total of $8.6 billion with a median decrease of $6.0
    million. Thus, the adoption of FIN 48 prompted changes to existing tax reserves
    totaling $19.6 billion. 200 companies reported no change in their tax reserves due to
    the adoption of FIN 48.

The adoption of FIN 48 also resulted in adjustments to shareholders’ equity by 584
    companies for a net decrease of $2.8 billion.

The total amount of tax reserves at year end was $189 billion. This is down $740
    million from the beginning of the year opening balance.

For the 2007/2008 fiscal year: 432 companies increased their tax reserves by a total
    of $18.4 billion with a median increase of $10.5 million; 291 companies decreased
    their tax reserves by a total of $19.2 billion with a median decrease of $9.0 million.

The net increase in tax reserves due to the adoption of FIN 48 plus the changes during
    the fiscal year totaled $1.6 billion.

The median tax reserve at the end of the fiscal year was $55.0 million, but ranged
    from a low of zero to a high of $6.3 billion.

Accrued interest and penalties amounted to $33.4 billion.

The amount of a company’s tax reserves is loosely correlated with its size.

Click here for a copy of the first quarter edition of
The Seigel Tax Reserve Report

Click here for a copy of the second quarter edition of
The Seigel Tax Reserve Report

Click here for a copy of the third quarter edition of
The Seigel Tax Reserve Report

Click here for a copy of the 2008 full year update of
The Seigel Tax Reserve Report