INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2012

Schedule of Components of Income Tax Expense (Benefit)

The components of income tax expense (benefit) applicable to pretax earnings for the years ended December 31 were as follows:



(In millions)	Japan				U.S.				Total
2012:
Current		$	513			$	303			$	816
Deferred		950				(330		)		620
Total income tax expense		$	1,463			$	(27	)		$	1,436
2011:
Current		$	358			$	533			$	891
Deferred		(301		)		423				122
Total income tax expense		$	57			$	956			$	1,013
2010:
Current		$	513			$	349			$	862
Deferred		538				(167		)		371
Total income tax expense		$	1,051			$	182			$	1,233

Schedule of Effective Income Tax Rate Reconciliation

The principal reasons for the differences and the related tax effects for the years ended December 31 were as follows:



(In millions)	2012				2011				2010
Income taxes based on U.S. statutory rates		$	1,506			$	1,032			$	1,247
Utilization of foreign tax credit		(53		)		(36		)		(31		)
Nondeductible expenses		8				10				10
Other, net		(25		)		7				7
Income tax expense		$	1,436			$	1,013			$	1,233

Schedule of Income Tax Expense Benefit Intraperiod Tax Allocation

Total income tax expense for the years ended December 31 was allocated as follows:



(In millions)	2012				2011				2010
Statements of earnings		$	1,436			$	1,013			$	1,233
Other comprehensive income (loss):
Unrealized foreign currency translation gains (losses) during period		363				(185		)		(339		)
Unrealized gains (losses) on investment securities:
Unrealized holding gains (losses) on investment securities during period		904				1,016				447
Reclassification adjustment for realized (gains) losses on investment securities included in net earnings		(174		)		(404		)		(147		)
Unrealized gains (losses) on derivatives during period		(8		)		(12		)		18
Pension liability adjustment during period		(7		)		(23		)		(11		)
Total income tax expense (benefit) related to items of other comprehensive income (loss)		1,078				392				(32		)
Additional paid-in capital (exercise of stock options)		(12		)		(7		)		(31		)
Cumulative effect of change in accounting principle		0				0				(89		)
Total income taxes		$	2,502			$	1,398			$	1,081

Schedule of Deferred Tax Assets and Liabilities

The income tax effects of the temporary differences that gave rise to deferred income tax assets and liabilities as of December 31 were as follows:



(In millions)	2012			2011
Deferred income tax liabilities:
Deferred policy acquisition costs		$	2,731		$	2,799
Unrealized gains on investment securities		1,522			397
Policyholder protection corporation obligation		10			0
Difference in tax basis of investment in Aflac Japan		288			0
Premiums receivable		164			153
Policy benefit reserves		1,995			1,896
Total deferred income tax liabilities		6,710			5,245
Deferred income tax assets:
Depreciation		124			134
Policyholder protection corporation obligation		0			5
Difference in tax basis of investment in Aflac Japan		0			47
Other basis differences in investment securities		1,471			1,363
Unfunded retirement benefits		45			44
Other accrued expenses		60			64
Policy and contract claims		67			106
Unrealized exchange loss on yen-denominated notes payable		36			124
Deferred compensation		203			201
Capital loss carryforwards		716			784
Other		438			405
Total deferred income tax assets		3,160			3,277
Net deferred income tax liability		3,550			1,968
Current income tax liability		308			340
Total income tax liability		$	3,858		$	2,308

Summary of Income Tax Contingencies

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows for the years ended December 31:



(In millions)	2012				2011
Balance, beginning of year	$	31		⁽¹⁾	$	24	⁽¹⁾
Additions for tax positions of prior years	7				7
Settlements	(3		)		0
Reductions for tax positions of prior years	(14		)		0
Balance, end of year	$	21		⁽¹⁾	$	31	⁽¹⁾

⁽¹⁾Amounts do not include tax deductions of $7 at December 31, 2012, $10 at December 31, 2011, and $8 at January 1, 2011.

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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