2013 Form 10-K

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36 Dollar amounts in millions except per share amounts or as otherwise specified Deferred income tax assets and liabilities: December 31 2013 2012 Deferred income tax assets: Inventories $ 607 $ 623 Other accrued expenses 288 212 Depreciation and amortization 46 41 State income taxes 53 54 Share-based compensation 101 115 Net operating loss carryforwards 124 90 Other 107 97 Total deferred income tax assets 1,326 1,232 Less valuation allowances (39) (33) Total deferred income tax assets after valuation allowances 1,287 1,199 Deferred income tax liabilities: Depreciation and amortization (668) (450) Other (102) (57) Total deferred income tax liabilities (770) (507) Net deferred income tax assets $ 517 $ 692 Reported as: Current assets— Prepaid expenses and other $ 880 $ 811 Noncurrent assets—Other 34 63 Current liabilities—Accrued expenses and other liabilities — — Noncurrent liabilities—Other liabilities (397) (182) $ 517 $ 692 Accrued interest and penalties reported as accrued expenses and other liabilities $ 34 $ 49 Net operating loss carryforwards totaling $377 at December 31, 2013 are available to reduce future taxable earnings of certain domestic and foreign subsidiaries. United States loss carryforwards of $270 expire between 2013 and 2032. International loss carryforwards of $107 expire beginning in 2013; however, some have no expiration. Of these carryforwards, $55 are subject to a full valuation allowance. We also have a tax credit carryforward of $25 with a full valuation allowance. These credits have no expiration; however, we do not anticipate generating income tax in excess of the credits in the foreseeable future. No provision has been made for United States federal and state income taxes or international income taxes that may result from future remittances of the undistributed earnings of foreign subsidiaries that are determined to be indefinitely reinvested ($7,023 at December 31, 2013). Determination of the amount of any unrecognized deferred income tax liability on these is not practicable. The changes in the amounts recorded for uncertain income tax positions are as follows: December 31 2013 2012 Balance at beginning of year $ 227 $ 249 Increases related to current year income tax positions 22 17 Increases related to prior year income tax positions 56 3 Decreases related to prior year income tax positions: Settlements and resolutions of income tax audits (37) (19) Statute of limitations expirations (64) (23) Balance at end of year $ 204 $ 227 Reported as: Current liabilities—Income taxes $ 10 $ 11 Noncurrent liabilities—Other liabilities 194 216 $ 204 $ 227 Our income tax expense could have been reduced by $194 and $216 at December 31, 2013 and December 31, 2012, respectively, had these uncertain income tax positions been favorably resolved. It is reasonably possible that the amount of unrecognized tax benefits will significantly change due to one or more of the following events in the next twelve months: expiring statutes, audit activity, tax payments, competent authority proceedings related to transfer pricing or final decisions in matters that are the subject of controversy in various taxing jurisdictions in which we operate, including inventory transfer pricing and cost sharing, product royalty and foreign branch arrangements. We are not able to reasonably estimate the amount or the future periods in which changes in unrecognized tax benefits may be resolved; however, we do not anticipate any significant changes within the next twelve months. Interest and penalties incurred associated with uncertain tax positions are included in other income (expense). In the normal course of business, income tax authorities in various income tax jurisdictions both within the United States and internationally conduct routine audits of our income tax returns filed in prior years. These audits are generally designed to determine if individual income tax authorities are in agreement with our interpretations of complex income tax regulations regarding the allocation of income to the various income tax jurisdictions. Income tax years are open from 2010 through the current year for the United States federal jurisdiction; income tax years open for our other major jurisdictions range from 2003 through the current year. NOTE 12 - RETIREMENT PLANS We provide certain employees with defined contribution plans. A portion of our retirement plan expense under the defined contribution plans is funded with Stryker common stock. The use of Stryker common stock represents a non-cash operating activity that is not reflected in the consolidated statements of cash flows. 2013 2012 2011 Defined contribution retirement plan expense $ 132 $ 112 $ 106 Defined contribution plan expense funded with Stryker common stock 16 15 12 Stryker common stock held by defined contribution plan Dollar amount 150 104 91 Shares (in millions of shares) 2.0 1.9 1.8 Value as a percentage of total plan assets 9% 9% 9%

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