Adobe 2004 Annual Report Download - page 81

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The tax effects of the temporary differences that give rise to significant portions of the deferred tax
assets and liabilities as of December 3, 2004 and November 28, 2003 are presented below:
2004 2003
Deferred tax assets:
Acquired technology ...................................................
.
$ 7,886 $ 14,711
Reserves and deferred revenue....................................
.
24,990 39,568
Unrealized losses on investments................................
.
12,336 13,574
Credits .........................................................................
.
30,600 8,230
Total gross deferred tax assets ................................
.
75,812 76,083
Deferred tax asset valuation allowance...................
.
(12,336) (13,574)
Total deferred tax assets..........................................
.
63,476 62,509
Deferred tax liabilities:
Depreciation and amortization ....................................
.
(8,138) (9,422)
Undistributed earnings of foreign subsidiaries ............
.
(81,585) (30,562)
Other............................................................................
.
(911) (4,365)
Total deferred tax liabilities..................................
.
(90,634) (44,349)
Net deferred tax assets (liabilities)....................................
.
$ (27,158) $ 18,160
We provide United States income taxes on the earnings of foreign subsidiaries unless the subsidiaries’
earnings are considered permanently reinvested outside the United States. To the extent that the foreign
earnings previously treated as permanently reinvested are repatriated, the related United States tax liability
may be reduced by any foreign income taxes paid on these earnings. As of December 3, 2004, the
cumulative amount of earnings upon which U.S. income taxes have not been provided is approximately
$368 million. The unrecognized deferred tax liability for these earnings is approximately $117 million.
For financial reporting purposes, a valuation allowance has been established for certain deferred tax
assets related to the write-down of investments. At the end of fiscal 2004, our valuation allowance was
$12.3 million.
At the end of fiscal 2004, we had Federal tax credit carry-forwards of approximately $4.9 million that
can be carried forward 20 years and state tax credit carry-forwards of approximately $25.7 million that can
be carried forward indefinitely.
Below is a summary of our income tax payable activity for fiscal 2004 and 2003:
2004 2003
Beginning balance..................................$ 193,484 $ 173,311
Add: Current year liability ..................... 15,135 45,655
Less: Payments and reclassifications...... (62,706) (25,482)
Ending balance.......................................$ 145,913 $ 193,484
Note 10. Benefit Plans
Pretax Savings Plan
In 1987, we adopted an Employee Investment Plan, qualified under Section 401(k) of the Internal
Revenue Code, which is a pretax savings plan covering substantially all of our United States employees.
Under the plan, eligible employees may contribute up to 18% of their pretax salary, subject to the Internal
Revenue Service annual contribution limits. In fiscal 2004, we matched 50% of the first 6% of the
employee’s contribution. We contributed approximately $6.5 million, $6.1 million and $6.0 million in
fiscal 2004, 2003 and 2002, respectively. We can terminate matching contributions at our discretion.
Profit Sharing Plan
We have a profit sharing plan that provides for profit sharing payments to all eligible employees
following each quarter in which we achieve at least 80% of our budgeted earnings for the quarter. The plan,
as well as the annual operating budget on which the plan is based, is approved by our Board of Directors.
We contributed approximately $42.6 million, $28.8 million and $18.8 million to the plan in fiscal 2004,
2003 and 2002, respectively.