Stryker 2014 Annual Report

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The changes in the amounts recorded for uncertain income tax positions are: December 2014 2013 Balance at beginning of year $ 204 $ 227 Increases related to current year income tax positions 133 22 Increases related to prior year income tax positions 23 56 Decreases related to prior year income tax positions: Settlements and resolutions of income tax audits (33) (37) Statute of limitations expirations (1) (64) Foreign currency translation (6) — Other (5) — Balance at end of year $ 315 $ 204 Reported as: Current liabilities—Income taxes $ 3 $ 10 Noncurrent liabilities—Other liabilities 312 194 $ 315 $ 204 Our income tax expense could have been reduced by $307 and $194 at December 31, 2014 and 2013, 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 2005 through the current year. STRYKER CORPORATION 2014 Form 10-K 32 Dollar amounts in millions except per share amounts or as otherwise specified. NOTE 11 - RETIREMENT PLANS Defined Contribution 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. 2014 2013 2012 Plan expense $ 132 $ 132 $ 112 Expense funded with Stryker common stock 18 16 15 Stryker common stock held by plan Dollar amount 198 150 104 Shares (in millions of shares) 2.1 2.0 1.9 Value as a percentage of total plan assets 11 % 9 % 9 % Defined Benefit Plans Certain of our subsidiaries have both funded and unfunded defined benefit pension plans covering some or all of their employees. Substantially all of the defined benefit pension plans have projected benefit obligations in excess of plan assets. Obligations and Funded Status December 2014 2013 Funded status Fair value of plan assets $ 310 $ 281 Benefit obligations 570 456 Funded status $ (260 ) $ (175 ) Reported as: Current liabilities—accrued compensation (1) (1) Noncurrent liabilities—other liabilities (259) (174) Pre-tax amounts recognized in AOCI Unrecognized net actuarial loss $ (195) $ (115) Unrecognized prior service cost 15 12 $ (180 ) $ (103 ) The estimated net actuarial loss for the defined benefit pension plans to be reclassified from AOCI into net periodic benefit cost in 2015 is $9. We estimate that an immaterial amount of amortization of prior service cost and transition amount for the defined benefit pension plans will be reclassified from AOCI into net periodic benefit cost in 2014. Pension plans with an accumulated benefit obligation in excess of plan assets had projected benefit obligations, accumulated benefit obligations and fair value of plan assets of $570, $533, and $310, respectively, at December 31, 2014 and $456, $427, and $281, respectively, at December 31, 2013. Change in Benefit Obligations: December 2014 2013 Beginning Projected benefit obligations $ 456 $ 447 Service cost 26 30 Interest cost 13 13 Foreign exchange impact (43) 2 Employee contributions 6 6 Actuarial (gains) losses 134 (29) Plan amendments (5) (1) Acquisitions 5 — Benefits paid (22) (12) Ending Projected benefit obligations $ 570 $ 456 Ending Accumulated benefit obligations $ 533 $ 427 Change in Plan Assets: December 2014 2013 Beginning Fair value of plan assets 281 254 Actual return 46 11 Employer contributions 18 20 Employee contributions 6 6 Foreign exchange impact (24) 1 Acquisition 3 — Benefits paid (20) (11) Ending Fair value of plan assets $ 310 $ 281

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