American Airlines 2002 Annual Report Download - page 75
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73
10. Income Taxes (Continued)
The income tax provision (benefit) for income (loss) from continuing operations before extraordinary loss
and cumulative effect of accounting change differed from amounts computed at the statutory federal income tax
rate as follows (in millions):
Year Ended December 31,
2002 2001 2000
Statutory income tax provision (benefit) $ (1,351) $ (965) $ 450
State income tax provision (benefit), net of
federal tax effect (103) (58) 30
Meal expense 16 18 19
Expiration of foreign tax credits 39 - -
Foreign tax credit carryforwards - (7) -
Change in valuation allowance 50 7 -
Other, net 12 11 9
Income tax provision (benefit) $ (1,337) $ (994) $ 508
The change in valuation allowance in 2002 related to the Company’s uncertainty regarding the realization
of the foreign tax credit carryforwards and state net operating losses. The change in valuation allowance in 2001
related to the Company’s uncertainty regarding the realization of the foreign tax credit carryforwards.
Additionally, as of December 31, 2002, the recording of Other Comprehensive Income items, primarily the
minimum pension liability, resulted in a net deferred tax asset. The Company recorded a $313 million valuation
allowance as a component of Accumulated Other Comprehensive Income related to such net deferred tax asset.
The Company provides a valuation allowance for deferred tax assets when it is more likely than not that
some portion or all of its deferred tax assets will not be realized. In assessing the realizability of the deferred tax
assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets
will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable
income (including reversals of deferred tax liabilities) during the periods in which those temporary differences will
become deductible.