Avid 2015 Annual Report Download - page 92

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Net deferred tax assets (liabilities) consisted of the following at December 31, 2015 and 2014 (in thousands):
December 31,
2015 2014
Deferred tax assets:
Tax credit and net operating loss carryforwards $ 318,471 $ 290,523
Allowances for bad debts 372 231
Difference in accounting for:
Revenues 54,475 63,916
Costs and expenses 34,116 29,004
Inventories 7,576 7,004
Acquired intangible assets 9,799 13,667
Gross deferred tax assets 424,809 404,345
Valuation allowance (406,123) (398,733)
Deferred tax assets after valuation allowance 18,686 5,612
Deferred tax liabilities:
Difference in accounting for:
Costs and expenses (5,654) (3,540)
Acquired intangible assets (8,554) —
Basis difference convertible notes (5,910) —
Gross deferred tax liabilities (20,118) (3,540)
Net deferred tax (liabilities) assets $ (1,432) $ 2,072
Recorded as:
Long-term deferred tax assets, net 2,011 2,208
Long-term deferred tax liabilities, net (3,443) (136)
Net deferred tax (liabilities) assets $ (1,432) $ 2,072
On January 1, 2015 the Company adopted ASU 2015-17, Balance Sheet Classification of Deferred Taxes. The standard requires
entities to present DTAs and DTLs as non-current in the classified balance sheet. The standard simplifies the current guidance, which
requires entities to separately present DTAs and DTLs as current and non-current in a classified balance sheet. The Company early
adopted the guidance to simplify its reporting for the current year. The consolidated balance sheet at December 31, 2014 was
retrospectively adjusted, resulting in a $0.3 million reclassification of current DTAs to long-term DTAs.
Deferred tax assets and liabilities reflect the net tax effects of the tax credits and net operating loss carryforwards and the temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes. The ultimate realization of the net deferred tax assets is dependent upon the generation of sufficient future taxable income
in the applicable tax jurisdictions. Based on the magnitude of the deferred tax assets at December 31, 2015 and 2014 and the level of
historical U.S. tax losses, management has determined that the uncertainty regarding the realization of these assets warranted a
significant valuation allowance at December 31, 2015 and 2014.
For U.S. federal and state income tax purposes at December 31, 2015, the Company had tax credit carryforwards of $53.1 million,
which will expire between 2016 and 2035, and net operating loss carryforwards of $745.6 million, which will expire between 2019
and 2035. The federal net operating loss and tax credit amounts are subject to annual limitations under Section 382 change of
ownership rules of the Internal Revenue Code. The Company completed an assessment at March 31, 2015 regarding whether there
may have been a Section 382 ownership change and concluded that it is more likely than not that none of the Company’s net operating
loss and tax credit amounts are subject to any Section 382 limitation.
Additionally, the Company has foreign net operating loss carryforwards of $33.8 million and tax credit carryforwards of $3.7 million
that begin to expire in 2029. The Company has determined there is uncertainty regarding the realization of a portion of these assets
and has recorded a valuation allowance against $23.1 million of net operating losses and $3.7 million of tax credits at December 31,
2015.