NOTES TO THE FINANCIAL STATEMENTS NOTE 2. Summary of Accounting Policies (Continued) The following table illustrates the effect on net income and earnings per share had the fair value method been applied to all  unvested outstanding stock option awards in each year (in millions): 2004 2003 2002 Income/(loss) attributable to Common and Class B Stock after Preferred Stock dividends, as reported  $ 3,487 $  495 $  (995) Add: Employee stock option expense included in reported net income, net of related tax effects 77 112 - Deduct: Total employee stock option expense determined under fair value method for all awards, net of related tax effects (77) (112) (179) Pro forma net income/(loss) $ 3,487 $  495 $ (1,174) Amounts per share: Basic – as reported $ 1.91 $  0.27 $  (0.55) Basic – pro forma (0.65) Diluted – as reported $ 1.73 $  0.27 $  (0.54) Diluted – pro forma (0.64)  2004  2003  2002 Income/(loss) before income taxes (in millions) U.S. $ 3,099 $  (246) $  1,211 Non-U.S. 1,501 1,501 (67) Total $ 4,600 $  1,255 $  1,144 Provision for income taxes (in millions) Current: Federal $ (119) $  (149) $  (423) Non-U.S. 1,038 653 547 State and local (148) 32 - Total Current 771 536 124 Deferred: Federal 958 (209) 261 Non-U.S. (804) (141) (116) State and local 12 (63) 73 Total Deferred  166 (413) 218 Total $ 937 $  123 $  342 Reconciliation of effective tax rate U.S. statutory rate  35 % 35 % 35 % Non-U.S. income taxes (2) (2) (3) State and local income taxes 1 5 Deductible dividends (3) (4) (7) General business credits (12) (20) Dispositions and restructurings - - 20 Prior year settlements & claims (6) - Other (2) (5) Effective rate  20 % 10 % 30 % Components of income taxes, excluding discontinued operations, cumulative effects of changes in accounting principles and  equity in net results of affiliated companies accounted for after-tax, are as follows: NOTE 3. INCOME TAXES  6 4