Cisco 2005 Annual Report Download - page 64
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67
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:
July 30, 2005
35.0%
1.8
(0.5)
(8.1)
0.6
(0.3)
0.1
28.6%
During the fourth quarter of fiscal 2005, the Internal Revenue Service completed its examination of the Company’s federal income tax returns
for the fiscal years ended July 25, 1998 through July 28, 2001. Based on the results of the examination, the Company has decreased
previously recorded tax reserves by approximately $110 million and decreased income tax expense by a corresponding amount.
This decrease to the provision for income taxes was offset by increases to the provision for income taxes of $57 million related to a fourth
quarter fiscal 2005 intercompany restructuring of certain of the Company’s foreign operations and $70 million related to the effects of
new U.S. tax regulations effective in fiscal 2005 that require intercompany reimbursement of certain stock-based compensation expenses.
These amounts are included in foreign income at other than U.S. rates in the table above.
U.S. income taxes and foreign withholding taxes were not provided for on a cumulative total of $6.8 billion of undistributed
earnings for certain foreign subsidiaries. The Company intends to reinvest these earnings indefinitely in its foreign subsidiaries.
If these earnings were distributed to the United States in the form of dividends or otherwise, or if the shares of the relevant foreign
subsidiaries were sold or otherwise transferred, the Company would be subject to additional U.S. income taxes (subject to an
adjustment for foreign tax credits) and foreign withholding taxes. Determination of the amount of unrecognized deferred income tax
liability related to these earnings is not practicable.
The following table presents the breakdown between current and noncurrent net deferred tax assets (in millions):
July 30, 2005
$ 1,582
1,201
$ 2,783
The noncurrent portion of the deferred tax assets is included in other assets.
Notes to Consolidated Financial Statements