Blackberry 2016 Annual Report Download - page 96

BlackBerry Limited
Notes to the Consolidated Financial Statements
In millions of United States dollars, except share and per share data, and except as otherwise indicated
28
The Company has adopted ASC 740-10-65-4 Balance Sheet Classification of Deferred Income Taxes, and this has been
prospectively applied starting in the fourth quarter of fiscal 2016. Any prior periods were not retrospectively adjusted.
Deferred income tax assets and liabilities consist of the following temporary differences:
As at
February 29, 2016 February 28, 2015
Assets
Property, plant, equipment and intangibles $ 42 $ 81
Non-deductible reserves 122 108
Minimum taxes 264 268
Convertible Debentures (see note 10) 7 121
Research and development 244 199
Tax loss carryforwards 450 84
Other 60 15
Deferred income tax assets 1,189 876
Valuation allowance 993 866
Deferred income tax assets net of valuation allowance 196 10
Liabilities
Property, plant, equipment and intangibles (173)(15)
Withholding tax on unremitted earnings — (33)
Deferred income tax liabilities (173)(48)
Net deferred income tax asset/(liability) $ 23 $ (38)
Deferred income tax asset - current $ — $ 10
Deferred income tax asset 33 —
Deferred income tax liability (10)(48)
$ 23 $ (38)
The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In making that
assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the
deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or
all of the deferred tax assets will be realized. In evaluating the need for a valuation allowance, the Company noted that
there were increases in deductible temporary differences which are not currently deductible for tax purposes and the
Company has three years of cumulative losses for fiscal 2016. As a result, the Company was unable to recognize the
benefit relating to a significant portion of deferred tax assets that arose in fiscal 2016 and earlier, which resulted in the
recognition of a $993 million (February 28, 2015 - $866 million) valuation allowance against its deferred tax assets. The
fiscal 2016 deferred tax recovery is partially offset by this deferred tax valuation allowance of $58 million and included in
the income tax provision in fiscal 2016 (February 28, 2015 - $79 million). This accounting treatment has no effect on the
Company’s actual ability to utilize deferred tax assets to reduce future cash tax payments. The Company will continue to
assess the likelihood that the deferred tax assets will be realizable at each reporting period and the valuation allowance
will be adjusted accordingly.
Given the change in financial circumstances for certain foreign subsidiaries of the Company in fiscal 2016, a
determination was made that the Company’s cumulative undistributed earnings for certain foreign subsidiaries will now
be indefinitely reinvested, and as a result, the withholding tax accrual of $33 million related to these undistributed
earnings recorded as a deferred tax liability was reversed.