Amendment No. 3 to Form S-1 Table of Contents NEW ALBERTSON'S BUSINESS OF SUPERVALU INC. AND SUBSIDIARIES Notes to Combined Financial Statements February 21, 2013 and February 23, 2012 (Dollars in millions) (r) Income Taxes NAI's operations are subject to United States federal, state and local income taxes. NAI's operations have historically been included in the Parent's income tax returns. In preparing its combined financial statements, NAI has determined its tax provision on a separate return, stand-alone basis. Because portions of NAI's operations are included in the Parent's tax returns, payments to certain tax authorities are made by Parent, and not by NAI. The resulting settlements are reflected as changes in Parent company net investment within the Combined Balance Sheets. NAI accounts for income taxes in accordance with Accounting Standards Codification (ASC) 740, Income Taxes (ASC 740). ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. Valuation allowances are established where management determines that it is more likely than not that some portion or all of a deferred tax asset will not be realized. Forecasted earnings, future taxable income and future prudent and feasible tax planning strategies are considered in determining the need for a valuation allowance. In the event NAI was not able to realize all or part of its net deferred tax assets in the future, the valuation allowance would be increased. Likewise, if it was determined that NAI was more-likely than-not to realize the net deferred tax assets, the applicable portion of the valuation allowance would reverse. Deferred income taxes represent future net tax effects of temporary differences between the fin