Adobe 2009 Annual Report Download - page 100

ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
100
Total income tax expense differs from the expected tax expense (computed by multiplying the U.S. federal statutory rate
of 35% by income before income taxes) as a result of the following (in thousands):
2009
2008
2007
Computed “expected” tax expense ...............................
$
245,532
$
377,478
$
331,516
State tax expense, net of federal benefit ...........................
7,799
12,700
8,938
Tax-exempt income ...........................................
—
(342
)
(11,123
)
Tax credits ..................................................
(14,127
)
(12,873
)
(23,341
)
Differences between statutory rate and foreign effective tax rate ......
(91,262
)
(132,470
)
(84,740
)
Change in deferred tax asset valuation allowance ...................
2,759
(1,105
)
1,694
Stock-based compensation (net of tax deduction) ...................
6,085
5,457
2,587
Resolution of U.S. income tax exam for fiscal 2001 - 2004 years ......
—
(20,712
)
—
Foreign tax refund for fiscal 2000 - 2002 .........................
—
(16,351
)
—
Domestic manufacturing deduction benefit ........................
(7,525
)
(6,300
)
(4,419
)
Tax charge for licensing Omniture’s technology to foreign subsidiaries
161,701
—
—
Other, net ...................................................
4,050
1,212
2,271
Provision for income taxes ...................................
$
315,012
$
206,694
$
223,383
Deferred Tax Assets and Liabilities
The tax effects of the temporary differences that gave rise to significant portions of the deferred tax assets and liabilities
as of November 28, 2008 and November 27, 2009 are presented below (in thousands):
2009
2008
Deferred tax assets:
Acquired technology ...................................................
$
937
$
4,497
Reserves and accruals ..................................................
68,472
71,174
Deferred revenue ......................................................
17,441
46,200
Unrealized losses on investments .........................................
15,263
10,350
Stock-based compensation ..............................................
56,541
50,329
Net operating loss of acquired companies ..................................
56,138
7,621
Credits ..............................................................
12,205
19,130
Capitalized expenses ...................................................
5,701
5,688
Other................................................................
11,603
3,538
Total gross deferred tax assets .........................................
244,301
218,527
Deferred tax asset valuation allowance ..................................
(4,283
)
(1,524
)
Total deferred tax assets ..............................................
240,018
217,003
Deferred tax liabilities:
Depreciation and amortization ...........................................
(11,975
)
(3,113
)
Undistributed earnings of foreign subsidiaries ..............................
(210,619
)
(167,760
)
Acquired intangible assets ..............................................
(192,493
)
(52,745
)
Total deferred tax liabilities ...........................................
(415,087
)
(223,618
)
Net deferred tax (liabilities) assets ..........................................
$
(175,069
)
$
(6,615
)
The deferred tax assets and liabilities for fiscal 2009 and fiscal 2008 include amounts related to various acquisitions.
The total change in deferred tax assets and liabilities in fiscal 2009 includes changes that are recorded to other comprehensive
income, additional paid-in capital, goodwill and retained earnings.
We provide U.S. income taxes on the earnings of foreign subsidiaries unless the subsidiaries’ earnings are considered
permanently reinvested outside the U.S. To the extent that the foreign earnings previously treated as permanently reinvested
are repatriated, the related U.S. tax liability may be reduced by any foreign income taxes paid on these earnings. As of
November 27, 2009, the cumulative amount of earnings upon which U.S. income taxes have not been provided is
approximately $1.5 billion. The unrecognized deferred tax liability for these earnings is approximately $420.9 million.