DIRECTV 2005 Annual Report Download - page 102

THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —(continued)
Our income tax (benefit) expense was different than the amount computed using the U.S. federal
statutory income tax rate for the reasons set forth in the following table:
2005 2004 2003
(Dollars in Millions)
Expected (expense) benefit at U.S. federal statutory income tax rate ...... $(168.1) $616.0 $167.2
U.S. state and local income tax (expense) benefit .................... (15.5) 57.5 2.9
Resolution of tax contingencies ................................. — 0.4 48.0
Tax basis differences attributable to divestitures ..................... — 8.9 —
Minority interests in partnership earnings ......................... 2.9 (4.6) —
Non-deductible goodwill and intangible assets ...................... — — (20.4)
Foreign taxes, net of tax deduction .............................. 2.9 6.3 (22.4)
Extraterritorial income exclusion tax benefit ....................... 2.1 1.7 2.8
Change in valuation allowance ................................. 10.4 14.6 (62.3)
Transaction costs and other ................................... (7.9) (10.2) (11.5)
Total income tax (expense) benefit ........................... $(173.2) $690.6 $104.3
Temporary differences and carryforwards that gave rise to deferred tax assets and liabilities at
December 31 were as follows:
2005 2004
Deferred Deferred Deferred Deferred
Tax Tax Tax Ta x
Assets Liabilities Assets Liabilities
(Dollars in Millions)
Accruals and advances ............................ $ 177.0 $ 51.9 $ 254.3 $ 44.5
Prepaid expenses ................................ — 28.8 — 36.1
State taxes ..................................... — 32.5 — 38.5
Depreciation, amortization and asset impairment charges . . . 83.9 — 390.3 —
Net operating loss and tax credit carryforwards .......... 682.9 — 753.4 —
Programming contract liabilities ..................... 311.0 — 144.4 —
Unrealized gains on securities ....................... — 15.1 — 14.5
Tax basis differences in investments and affiliates ......... 136.2 490.6 28.9 423.5
Other ........................................ 41.6 3.4 47.0 6.4
Subtotal ...................................... 1,432.6 622.3 1,618.3 563.5
Valuation allowance .............................. (154.6) — (214.6) —
Total deferred taxes ........................... $1,278.0 $622.3 $1,403.7 $563.5
We assessed the deferred tax assets for the respective periods for recoverability and, where
applicable, we recorded a valuation allowance to reduce the total deferred tax assets to an amount that
will, more likely than not, be realized in the future.
The valuation allowance balances at December 31, 2005 and 2004 of $154.6 million and
$214.6 million, respectively, are primarily attributable to the unused foreign operating losses, and
unused capital losses both of which are available for carry-forward. For the year ended December 31,
2005, the change in the valuation allowance was primarily attributable to a $33.5 million decrease for
the tax effect of current year capital gains adjusted for the tax effect of future capital gains and losses
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