Cisco 2003 Annual Report Download - page 60

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The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income
taxes consisted of the following:
Years Ended July 26, 2003 July 27, 2002 July 28, 2001
Federal statutory rate 35.0 % 35.0% (35.0)%
Effect of:
State taxes, net of federal tax benefit 1.8 1.8 (2.4)
Export sales benefit (0.2) (1.5) (1.8)
Foreign income at other than U.S. rates (8.9) (4.9) (1.7)
Nondeductible in-process R&D — 0.9 30.3
Nondeductible goodwill —— 20.9
Nondeductible deferred stock-based compensation 0.8 1.9 8.0
Tax-exempt interest —— (1.0)
Tax credits —(3.4) (2.5)
Other, net 0.1 0.3 1.2
Total 28.6% 30.1% 16.0%
U.S. income taxes and foreign withholding taxes were not provided for on a cumulative total of $2.5 billion of undistributed earnings
for certain non-U.S. subsidiaries. The Company intends to reinvest these earnings indefinitely in operations outside the United States. The
components of the deferred tax assets (liabilities) are as follows (in millions):
July 26, 2003 July 27, 2002
ASSETS
Allowance for doubtful accounts and returns $228 $247
Sales-type and direct-financing leases 297 306
Loan reserves 123 249
Inventory allowances and capitalization 247 340
Investment provisions 654 476
In-process R&D, goodwill, and purchased intangible assets 608 578
Deferred revenue 899 968
Credits and net operating loss carryforwards 261 391
Other 509 330
Total deferred tax assets 3,826 3,885
LIABILITIES
Purchased intangible assets (233) (192)
Unrealized gains on investments (142) —
Total deferred tax liabilities (375) (192)
Total $3,451 $3,693
Reclassifications have been made to the fiscal 2002 balances for certain components of deferred tax assets in order to conform to
the current year presentation.
58 CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS