2K Sports 2009 Annual Report Download - page 101

The effects of temporary differences that gave rise to our deferred tax assets and liabilities were as follows:
October 31,
2009 2008
Current deferred tax assets and (liabilities):
Sales returns and allowances (including bad debt) $ 8,473 $ 9,129
Inventory reserves 4,307 4,068
Deferred rent 2,097 2,423
Deferred revenue 747 13,520
Other 11,802 10,462
Capitalized software and depreciation (49,726) (33,685)
Total current deferred tax assets (liabilities) (22,300) 5,917
Less: Valuation allowance —(4,468)
Net current deferred tax asset (liability)(a) (22,300) 1,449
Non-current deferred tax assets:
Equity compensation 2,534 2,558
Domestic net operating loss carryforward 122,255 71,324
Foreign tax credit carryforward 6,599 5,947
Foreign net operating loss carryforwards 9,189 5,350
Intangible amortization (432) 2,774
Capitalized software and depreciation 7,991 10,573
Total non-current deferred tax asset 148,136 98,526
Less: Valuation allowance (129,090) (99,837)
Net non-current deferred tax (liability) asset(b) 19,046 (1,311)
Deferred taxes, net $ (3,254) $ 138
(a) Included in accrued expenses and other current liabilities as of October 31, 2009 and prepaid expenses and other as of
October 31, 2008.
(b) Included in other assets as of October 31, 2009 and other long-term liabilities as of October 31, 2008.
The valuation allowance for deferred taxes is primarily attributable to net operating losses for which no
benefit is provided due to uncertainty with respect to their realization. In addition, during the year ended
October 31, 2009, we recorded a deferred tax benefit of $726 and a corresponding reduction to additional
paid-in-capital for the cancellation of certain stock options. The net deferred tax liability is the result of
deferred tax liabilities related to goodwill which cannot be used to offset deferred tax assets.
At October 31, 2009, we had a U.S. federal net operating loss carryforward totaling $319,116 of which
$22,317 is subject to limitation by the Internal Revenue Service. These net operating losses will begin to
expire in fiscal 2026. We also had foreign net operating losses of $47,463, of which $32,556 will expire in
2016 and $1,614 will expire in 2023. The remaining foreign net operating loss may be carried forward
indefinitely.
The total amount of undistributed earnings of foreign subsidiaries was approximately $209,200 and
$229,800 for the years ended October 31, 2009 and 2008, respectively. It is our intention to reinvest
undistributed earnings of our foreign subsidiaries and thereby indefinitely postpone their remittance.
Accordingly, no provision has been made for foreign withholding taxes or United States income taxes
which may become payable if undistributed earnings of foreign subsidiaries are paid as dividends. It is not
practicable to estimate the tax liability that would arise if these earnings were remitted.
We are regularly audited by domestic and foreign taxing authorities. Audits may result in tax assessments
in excess of amounts claimed and the payment of additional taxes. We believe that our tax return positions
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