Amgen 2007 Annual Report Download - page 147

AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Deferred income taxes reflect the temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes and the net tax effects of net operating loss
and credit carryforwards. Significant components of our deferred tax assets and liabilities are as follows (in millions):
December 31,
2007 2006
Deferred tax assets:
Intercompany inventory related items ................................ $ 581 $ 668
Expense accruals ................................................. 535 346
Acquired net operating loss and credit carryforwards .................... 399 532
Expenses capitalized for tax ........................................ 134 136
Convertible debt ................................................. 407 362
Stock-based compensation ......................................... 128 73
Other .......................................................... 172 93
Total deferred tax assets ......................................... 2,356 2,210
Valuation allowance .............................................. (166) (102)
Net deferred tax assets .......................................... 2,190 2,108
Deferred tax liabilities:
Acquired intangibles .............................................. (1,167) (1,320)
Financing debt instrument ......................................... (4) (54)
Fixed assets ..................................................... (158) (108)
Other .......................................................... (181) (3)
Total deferred tax liabilities ...................................... (1,510) (1,485)
Total deferred taxes ............................................ $ 680 $ 623
At December 31, 2007, we had net current deferred tax assets of $1.2 billion, primarily composed of tempo-
rary differences related to inventory, accrued liabilities and acquired net operating losses and credits. At
December 31, 2006, our net current deferred tax assets were $990 million.
The valuation allowance for deferred tax assets increased by $64 million in 2007. The increase was primar-
ily due to the deferred tax benefits relating to acquired net operating loss and credit carryforwards, as well as
certain foreign subsidiaries’ expenses capitalized for tax. At December 31, 2007, $54 million of benefits from
acquired net operating loss and credit carryforwards, which are included in the valuation allowance, will be re-
corded to goodwill if they are ultimately realized.
At December 31, 2007, we had operating loss carryforwards of $457 million available to reduce future feder-
al taxable income, which begin expiring in 2008. In addition, we had operating loss carryforwards of $668
million available to reduce future taxable income in various state taxing jurisdictions. We have provided a valu-
ation allowance against $456 million of the state operating loss carryforwards. The state operating loss
carryforwards will begin expiring in 2008.
Effective January 1, 2007, we adopted FASB Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in
Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”).FIN 48 clarifies the accounting for
uncertainty in income taxes by prescribing rules for recognition, measurement and classification in our con-
solidated financial statements of tax positions taken or expected to be taken in a tax return. For tax benefits to be
recognized under FIN 48, a tax position must be more-likely-than-not to be sustained upon examination by taxing
authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of
being realized upon settlement. There was no cumulative effect of applying the recognition and measurement
provisions upon adoption of FIN 48.
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