DIRECTV 2012 Annual Report Download - page 102

DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
Temporary differences and carryforwards that gave rise to deferred tax assets The valuation allowance balances of $432 million at December 31, 2012 and
and liabilities at December 31 were as follows: $466 million at December 31, 2011, are primarily attributable to unused foreign
operating losses and unused capital losses, both of which are available for carry
2012 2011 forward. For the year ended December 31, 2012, the decrease in the valuation
Deferred Deferred Deferred Deferred allowance was primarily attributable to a reduction in the deferred tax asset on
Tax Tax Ta x Tax
Assets Liabilities Assets Liabilities capital loss carryforwards.
(Dollars in Millions) Although realization is not assured, we have concluded that it is more likely
Accruals and advances ............. $ 466 $ 273 $ 418 $ 268 than not that our unreserved deferred tax assets will be realized in the ordinary
Prepaid expenses ................ — 32 — 34 course of operations based on available positive and negative evidence, including
State taxes .................... 74 — 73 — 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 ............. — 1,406 — 1,155 significant judgment and take into account our recent performance.
Net operating loss and tax credit
carryforwards ................. 626 — 610 — As of December 31, 2012, we have $17 million of federal net operating loss
Programming contract liabilities ...... 46 — 48 — 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 ...................... — 79 — 105 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 .................... 261 824 91 804 also have foreign tax credit carryovers of $133 million which expire between 2020
Other ....................... — — 6 5 and 2022, state net operating loss carryforwards of $30 million which expire
between 2029 and 2030, and approximately $2 billion of foreign net operating
Subtotal ...................... 1,473 2,614 1,246 2,371 losses that are primarily attributable to operations in Brazil with varying expiration
Valuation allowance .............. (432) — (466) — dates.
Total deferred taxes ............. $1,041 $2,614 $ 780 $2,371
As a result of the currency exchange process in Venezuela since 2010, exclusive
of the payment of some intercompany obligations, we have been unable to
Included in ‘‘Investments and other assets’’ in the Consolidated Balance Sheets
repatriate excess cash balances. As of December 31, 2012, the cumulative amount
are $116 million at December 31, 2012 and $210 million at December 31, 2011
of earnings upon which U.S. income taxes have not been provided is approximately
of noncurrent deferred tax assets. Also included in ‘‘Accounts payable and accrued
$536 million. Should these earnings be distributed in the form of dividends, the
liabilities’’ in the Consolidated Balance Sheets are $90 million at December 31,
distributions would be subject to U.S. federal income tax at the statutory rate of
2012 and $92 million at December 31, 2011 of current deferred tax liabilities.
35 percent, less foreign tax credits available to offset such distributions. Because the
We assessed the deferred tax assets for the respective periods for recoverability time or manner of repatriation is uncertain, we cannot determine the impact of
and, where applicable, we recorded a valuation allowance to reduce the total local taxes, withholding taxes and foreign tax credits associated with the future
deferred tax assets to an amount that will, more likely than not, be realized in the repatriation of such earnings and therefore cannot quantify the potential tax
future. liability.
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