Cisco 2014 Annual Report Download - page 127

The components of the deferred tax assets and liabilities are as follows (in millions):
July 26, 2014 July 27, 2013
ASSETS
Allowance for doubtful accounts and returns ............................................ $ 464 $ 390
Sales-type and direct-financing leases .................................................. 231 167
Inventory write-downs and capitalization ............................................... 307 216
Investment provisions .............................................................. 212 214
IPR&D, goodwill, and purchased intangible assets ....................................... 135 123
Deferred revenue .................................................................. 1,689 1,624
Credits and net operating loss carryforwards ............................................ 796 681
Share-based compensation expense .................................................... 661 783
Accrued compensation .............................................................. 496 486
Other ........................................................................... 676 560
Gross deferred tax assets ........................................................ 5,667 5,244
Valuation allowance ........................................................... (114) (98)
Total deferred tax assets ........................................................ 5,553 5,146
LIABILITIES
Purchased intangible assets .......................................................... (1,229) (1,101)
Depreciation ...................................................................... (48) (169)
Unrealized gains on investments ...................................................... (245) (211)
Other ........................................................................... (26) (23)
Total deferred tax liabilities ...................................................... (1,548) (1,504)
Total net deferred tax assets ................................................. $ 4,005 $ 3,642
As of July 26, 2014, the Company’s federal, state, and foreign net operating loss carryforwards for income tax purposes were
$233 million, $658 million, and $699 million, respectively. A significant amount of the federal net operating loss
carryforwards relates to acquisitions and, as a result, is limited in the amount that can be recognized in any one year. If not
utilized, the federal net operating loss will begin to expire in fiscal 2018, and the foreign and state net operating loss
carryforwards will begin to expire in fiscal 2015. The Company has provided a valuation allowance of $71 million for deferred
tax assets related to foreign net operating losses that are not expected to be realized.
As of July 26, 2014, the Company’s federal, state, and foreign tax credit carryforwards for income tax purposes were
approximately $8 million, $710 million, and $13 million, respectively. The federal and foreign tax credit carryforwards will
begin to expire in fiscal 2014 and 2027, respectively. The majority of state tax credits can be carried forward indefinitely;
however, the Company has provided a valuation allowance of $43 million for deferred tax assets related to state tax credits
that are not expected to be realized.
17. Segment Information and Major Customers
(a) Revenue and Gross Margin by Segment
The Company conducts business globally and is primarily managed on a geographic basis consisting of three segments: the
Americas, EMEA, and APJC. The Company’s management makes financial decisions and allocates resources based on the
information it receives from its internal management system. Sales are attributed to a segment based on the ordering location
of the customer. The Company does not allocate research and development, sales and marketing, or general and administrative
expenses to its segments in this internal management system because management does not include the information in its
measurement of the performance of the operating segments. In addition, the Company does not allocate amortization and
impairment of acquisition-related intangible assets, share-based compensation expense, significant litigation and other
contingencies, impacts to cost of sales from purchase accounting adjustments to inventory, charges related to asset
impairments and restructurings, and certain other charges to the gross margin for each segment because management does not
include this information in its measurement of the performance of the operating segments.
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