DIRECTV 2011 Annual Report Download - page 105

DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
Temporary differences and carryforwards that gave rise to deferred tax assets The valuation allowance balances of $466 million at December 31, 2011 and
and liabilities at December 31 were as follows: $504 million at December 31, 2010, are primarily attributable to unused foreign
operating losses and unused capital losses, both of which are available for carry
2011 2010 forward. For the year ended December 31, 2011, the decrease in the valuation
Deferred Deferred Deferred Deferred allowance was primarily attributable to a reduction in the deferred tax asset on
Tax Ta x Tax Tax
Assets Liabilities Assets Liabilities Brazilian net operating loss carryfowards as a result of currency fluctuations.
(Dollars in Millions) Although realization is not assured, we have concluded that it is more likely
Accruals and advances ............. $ 418 $ 268 $ 366 $ 168 than not that our unreserved deferred tax assets will be realized in the ordinary
Prepaid expenses ................ — 34 — 39 course of operations based on available positive and negative evidence, including
State taxes .................... 73 — 75 — scheduling of deferred tax liabilities and projected income from operating activities.
Depreciation, amortization and asset The underlying assumptions we use in forecasting future taxable income require
impairment charges ............. — 1,155 — 723 significant judgment and take into account our recent performance.
Net operating loss and tax credit
carryforwards ................. 610 — 533 — As of December 31, 2011, we have $27 million of federal net operating loss
Programming contract liabilities ...... 48 — 59 — carryforward which expires between 2027 and 2028. The utilization of the federal
Unrealized foreign exchange gains or net operating loss carryforward is subject to an annual limitation under Section 382
losses ...................... — 105 — 146 of the Internal Revenue Code, however we believe that we will have sufficient
Tax basis differences in investments and taxable income during the limitation period to utilize all of the carryforward. We
affiliates .................... 91 804 74 861 also have foreign tax credit carryovers of $126 million which expire between 2019
Other ....................... 6 5 11 8 and 2021, California research tax credits of $25 million which can be carried
forward indefinitely, state net operating loss carryforwards of $30 million which
Subtotal ...................... 1,246 2,371 1,118 1,945 expire between 2029 and 2030, and approximately $2 billion of foreign net
Valuation allowance .............. (466) — (504) — operating losses that are primarily attributable to operations in Brazil with varying
Total deferred taxes ............. $ 780 $2,371 $ 614 $1,945 expiration dates.
As a result of closing of the parallel exchange process in Venezuela in May
Included in ‘‘Investments and other assets’’ in the Consolidated Balance Sheets
2010, we have been unable to repatriate excess cash balances. As of December 31,
are $210 million at December 31, 2011 and $320 million at December 31, 2010
2011, the cumulative amount of earnings upon which U.S. income taxes have not
of noncurrent deferred tax assets. Also included in ‘‘Accounts payable and accrued
been provided is approximately $298 million. Should these earnings be distributed
liabilities’’ in the Consolidated Balance Sheets are $92 million at December 31,
in the form of dividends, the distributions would be subject to U.S. federal income
2011 and $34 million at December 31, 2010 of current deferred tax liabilities.
tax at the statutory rate of 35 percent, less foreign tax credits available to offset
We assessed the deferred tax assets for the respective periods for recoverability such distributions. Because the time or manner of repatriation is uncertain, we
and, where applicable, we recorded a valuation allowance to reduce the total cannot determine the impact of local taxes, withholding taxes and foreign tax
deferred tax assets to an amount that will, more likely than not, be realized in the credits associated with the future repatriation of such earnings and therefore cannot
future. quantify the tax liability.
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