14. Income Taxes

Schlumberger operates in more than 100 tax jurisdictions, where statutory tax rates generally vary from 0% to 40%.

Income from continuing operations before taxes which were subject to United States and non-United States income taxes for each of the three years ended December 31, were as follows:

	(Stated in millions)

	2014		2013		2012
United States	$	1,990	$	1,904	$	1,980
Outside United States		5,649		6,787		4,979
	$	7,639	$	8,691	$	6,959

Schlumberger recorded pretax charges of $1.773 billion in 2014 ($289 million in the US and $1.484 billion outside of the US). Schlumberger recorded net pretax credits of $420 million in 2013 ($53 million of charges in the US and $473 million of net credits outside the US) and $161 million of pretax charges in 2012 ($52 million in the US and $109 million outside the US). These charges and credits are included in the table above and are more fully described in Note 3 – Charges and Credits.

The components of net deferred tax assets (liabilities) were as follows:

	(Stated in millions)

	2014			2013
Postretirement benefits	$	327		$	236
Intangible assets		(1,435	)		(1,502	)
Investments in non-US subsidiaries		(227	)		(282	)
Other, net		183			128
	$	(1,152	)	$	(1,420	)

The above deferred tax balances at December 31, 2014 and 2013 were net of valuation allowances relating to net operating losses in certain countries of $190 million and $238 million, respectively.

The components of Taxes on income were as follows:

	(Stated in millions)

	2014			2013			2012
Current:
United States - Federal	$	718		$	682		$	698
United States - State		51			60			53
Outside United States		1,380			1,211			1,025
	$	2,149		$	1,953		$	1,776
Deferred:
United States - Federal	$	(194	)	$	(109	)	$	(105	)
United States - State		(9	)		(4	)		(7	)
Outside United States		(12	)		34			22
Valuation allowance		(6	)		(26	)		14
	$	(221	)	$	(105	)	$	(76	)
	$	1,928		$	1,848		$	1,700

A reconciliation of the United States statutory federal tax rate (35%) to the consolidated effective tax rate is:

	2014			2013			2012
US statutory federal rate		35	%		35	%		35	%
Non-US income taxed at different rates		(11	)		(12	)		(10	)
Charges and credits (See Note 3)		3			(2	)		—
Other		(2	)		—			(1	)
		25	%		21	%		24	%

A number of the jurisdictions in which Schlumberger operates have tax laws that are not fully defined and are evolving. Schlumberger’s tax filings are subject to regular audit by the tax authorities. Tax liabilities are recorded based on estimates of additional taxes which will be due upon the conclusion of these audits.

A reconciliation of the beginning and ending amount of liabilities associated with uncertain tax positions for the years ended December 31, 2014, 2013 and 2012 is as follows:

	(Stated in millions)

	2014			2013			2012
Balance at beginning of year	$	1,452		$	1,453		$	1,353
Additions based on tax positions related to the current year		154			146			156
Additions for tax positions of prior years		96			109			98
Additions related to acquisitions		43			—			—
Impact of changes in exchange rates		(62	)		(47	)		12
Settlements with tax authorities		(27	)		(64	)		(17	)
Reductions for tax positions of prior years		(212	)		(109	)		(103	)
Reductions due to the lapse of the applicable statute of limitations		(42	)		(36	)		(46	)
Balance at end of year	$	1,402		$	1,452		$	1,453

The amounts above exclude accrued interest and penalties of $243 million, $253 million and $250 million at December 31, 2014, 2013 and 2012, respectively.

Schlumberger classifies interest and penalties relating to uncertain tax positions within Taxes on income in the Consolidated Statement of Income. During 2014, 2013 and 2012, Schlumberger recognized $19 million, $30 million and $21 million in interest and penalties, respectively.

The following table summarizes the tax years that are either currently under audit or remain open and subject to examination by the tax authorities in the most significant jurisdictions in which Schlumberger operates:

Brazil		2009 - 2014
Canada		2007 - 2014
Ecuador		2001 - 2014
Mexico		2007 - 2014
Norway		2013 - 2014
Russia		2011 - 2014
Saudi Arabia		2001 - 2014
United Kingdom		2009 - 2014
United States		2011 - 2014

In certain of the jurisdictions noted above, Schlumberger operates through more than one legal entity, each of which may have different open years subject to examination. The table above presents the open years subject to examination for the most material of the legal entities in each jurisdiction. Additionally, it is important to note that tax years are technically not closed until the statute of limitations in each jurisdiction expires. In the jurisdictions noted above, the statute of limitations can extend beyond the open years subject to examination.