DIRECTV 2006 Annual Report Download - page 100

THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —(continued)
Our income tax (expense) benefit was different than the amount computed using the U.S. federal
statutory income tax rate for the reasons set forth in the following table for the years ended
December 31:
2006 2005 2004
(Dollars in Millions)
Expected (expense) benefit at U.S. federal statutory income tax rate ..... $(804.5) $(168.1) $616.0
U.S. state and local income tax (expense) benefit ................... (81.7) (15.5) 57.5
Tax basis differences attributable to divestitures .................... 24.8 — 8.9
Minority interests in partnership earnings ......................... (1.1) 2.9 (4.6)
Foreign taxes, net of tax deduction ............................. (6.9) 2.9 6.3
Change in valuation allowance ................................. 4.4 10.4 14.6
Transaction costs and other ................................... (0.5) (5.8) (8.1)
Total income tax (expense) benefit .......................... $(865.5) $(173.2) $690.6
Temporary differences and carryforwards that gave rise to deferred tax assets and liabilities at
December 31 were as follows:
2006 2005
Deferred Deferred Deferred Deferred
Tax Ta x Tax Tax
Assets Liabilities Assets Liabilities
(Dollars in Millions)
Accruals and advances ............................. $305.7 $ 90.7 $ 177.0 $ 51.9
Prepaid expenses ................................. — 43.2 — 28.8
State taxes ..................................... — 0.3 — 32.5
Depreciation, amortization and asset impairment charges . . . — 9.6 83.9 —
Net operating loss and tax credit carryforwards ........... 353.9 — 682.9 —
Programming contract liabilities ...................... 181.3 — 311.0 —
Unrealized foreign exchange gains or losses ............. — 22.5 — —
Unrealized gains on securities ....................... — — — 15.1
Tax basis differences in investments and affiliates ......... 39.6 672.9 136.2 490.6
Other ......................................... 2.3 21.5 41.6 3.4
Subtotal ....................................... 882.8 860.7 1,432.6 622.3
Valuation allowance ............................... (171.3) — (154.6) —
Total deferred taxes ........................... $711.5 $860.7 $1,278.0 $622.3
As of December 31, 2006 we had $315.2 million of long-term deferred tax liabilities, recorded in
‘‘Other Liabilities and Deferred Credits’’ in the Consolidated Balance Sheets.
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 of $171.3 million at December 31, 2006 and $154.6 million at
December 31, 2005, 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, 2006, the
change in the valuation allowance was primarily attributable to a $28.8 million increase for the tax
effect of an increase in deferred tax assets in foreign jurisdictions which we believe will not be realized
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