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Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when such differences are
expected to reverse. Valuation allowances are provided to reduce deferred tax assets to an amount that is more likely than not to
be realized. The Company evaluates the likelihood of realizing its deferred tax assets by estimating sources of future taxable
income and the impact of tax planning strategies. Significant components of the Company’s net deferred income taxes, which
are included in other assets in the consolidated statements of financial condition, were as follows (dollars in thousands):
Deferred tax assets:
Allowance for loan losses
Compensation and benefits
Customer fees and rewards
State income taxes
Other
Total deferred tax assets before valuation allowance
Valuation allowance
Total deferred tax assets (net of valuation allowance)
Deferred tax liabilities:
Depreciation and software amortization
Unearned income
Other
Total deferred tax liabilities
Net deferred tax assets
November 30,
2011
$ 829,336
90,028
323,660
62,131
82,080
1,387,235
—
1,387,235
(61,138)
(40,018)
(68,149)
(169,305)
$ 1,217,930
2010
$ 1,264,069
67,263
126,197
75,503
76,030
1,609,062
(22,876)
1,586,186
(41,550)
(33,386)
(42,045)
(116,981)
$ 1,469,205
Included in other deferred tax assets at November 30, 2011, is a $62.6 million capital loss carryforward for U.S. federal
income tax purposes with a tax benefit of $21.9 million that expires in 2013 and capital loss carryforwards for state purposes
with a tax benefit of $1.0 million that expire between 2013 and 2023. These deferred tax assets were created in connection with
the sale of the Goldfish business in March 2008. In 2009, the Company concluded there was no prudent or feasible tax planning
strategy that would allow it to realize the benefits of substantially all the federal and state capital losses within the carryforward
period. As a result, in 2009 the Company recorded a full valuation allowance against these deferred tax assets. In 2011, the
Company released the valuation allowance previously recorded as a tax benefit arising from the sale of the Goldfish business
unit since a viable tax planning strategy has been identified that will allow the Company to utilize the Goldfish capital loss.
A reconciliation of beginning and ending unrecognized tax benefits is as follows (dollars in thousands):
Balance at beginning of period
Additions:
Current year tax positions
Prior year tax positions
Reductions:
Prior year tax positions
Settlements with taxing authorities
Expired statute of limitations
Balance at end of period (1)
For the Years Ended November 30,
2011
$ 373,255
73,941
154,007
(83,289)
(9,129)
(1,881)
$ 506,904
2010
$ 305,721
10,016
134,420
(68,843)
(6,786)
(1,273)
$ 373,255
2009
$ 285,619
41,943
32,089
(19,719)
(32,508)
(1,703)
$ 305,721
(1) At November 30, 2011, 2010 and 2009, amounts included $97.1 million, $100.2 million and $81.9 million, respectively, of unrecognized tax benefits, which, if recognized,
would favorably affect the effective tax rate.
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