DIRECTV 2009 Annual Report Download - page 112

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DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
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 $711 million at December 31, 2009 and $511 million at
December 31, 2008, are primarily attributable to unused foreign operating losses and unused capital
losses, both of which are available for carry forward. For the year ended December 31, 2009,
$124 million of the increase in the valuation allowance was attributable to an increase in deferred tax
assets in Brazil as a result of the strength of the Brazilian real against the United States dollar during
2009, and $76 million was attributable to both foreign losses for which we do not expect to realize a tax
benefit and other losses for which there is no immediate plan to generate offsetting gains.
Although realization is not assured, we have concluded that it is more likely than not that our
unreserved deferred tax assets will be realized in the ordinary course of operations based on available
positive and negative evidence, including scheduling of deferred tax liabilities and projected income
from operating activities. The underlying assumptions we use in forecasting future taxable income
require significant judgment and take into account our recent performance.
As of December 31, 2009, we have $35 million of federal net operating loss carryforward which
expires between 2027 and 2028. The utilization of the federal net operating loss carryforward is subject
to an annual limitation under Section 382 of the Internal Revenue Code, however we believe that we
will have sufficient taxable income during the limitation period to utilize all of the carryforward. We
also have California research tax credits of $60 million which can be carried forward indefinitely and
approximately $2.2 billion of foreign net operating losses that are primarily attributable to operations in
Brazil with varying expiration dates.
No income tax provision has been made for the portion of undistributed earnings of foreign
subsidiaries deemed permanently reinvested that amounted to approximately $2 million in 2009. It is
not practicable to determine the amount of the unrecognized deferred tax liability related to the
investments in foreign subsidiaries.
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