EMC 2008 Annual Report Download - page 87

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The components of the current and noncurrent deferred tax assets and liabilities are as follows (table in thousands):
December 31, 2008 December 31, 2007
Deferred
Tax
Asset
Deferred
Tax
Liability
Deferred
Tax
Asset
Deferred
Tax
Liability
Current:
Accounts and notes receivable $ 53,627 $ — $ 60,819 $ —
Inventory 52,150 — 47,624 —
Accrued expenses 213,245 — 193,319 —
Deferred revenue 158,079 — 173,782 —
Total current 477,101 — 475,544 —
Noncurrent:
Property, plant and equipment, net — (76,129) — (34,489)
Intangible and other assets, net — (345,116) — (383,607)
Equity — (34,510) — (42,052)
Deferred revenue 10,759 — 59,265 —
Other noncurrent liabilities — (61,359) — (57,273)
Credit carryforwards 55,614 — 18,911 —
Net operating loss carryforwards 147,809 — 159,169 —
Other comprehensive loss 100,715 — 19,920 —
Total noncurrent 314,897 (517,114) 257,265 (517,421)
Gross deferred tax assets and liabilities 791,998 (517,114) 732,809 (517,421)
Valuation allowance (15,993) — (28,019) —
Total deferred tax assets and liabilities $776,005 $(517,114)$704,790 $(517,421)
We have gross federal and foreign net operating loss carryforwards of $271.0 million and $72.6 million, respectively. Portions of these carryforwards are
subject to annual limitations, including Section 382 of the Internal Revenue Code of 1986 ("Code"), as amended, for U.S. tax purposes and similar provisions
under other countries' tax laws. Certain of these net operating losses will begin to expire in 2012, while others have an unlimited carryforward period.
We have federal and state credit carryforwards of $46.5 million and $9.1 million, respectively. Portions of these carryforwards are subject to annual
limitations, including Section 382 of the Code, as amended, for U.S. tax purposes and similar provisions under other countries' tax laws. Certain of these
credits will begin to expire in 2009, while others have an unlimited carryforward period.
The valuation allowance decreased from $28.0 million at December 31, 2007 to $16.0 million at December 31, 2008. The decrease was principally
attributable to revaluations of foreign subsidiaries' net operating loss carryforwards arising from fluctuations in foreign currency and the reduction in the
valuation allowance for certain credit carryforwards. The valuation allowance at December 31, 2008 relates to foreign subsidiaries' net operating loss
carryforwards.
Deferred income taxes have not been provided on basis differences related to investments in foreign subsidiaries. These basis differences were
approximately $3.7 billion and $2.7 billion at December 31, 2008 and 2007, respectively, and consisted of undistributed earnings permanently invested in
these entities. The change in the basis difference between 2007 and 2008 was mainly attributable to income earned in the current year. If these earnings were
distributed to the United States in the form of dividends or otherwise, we would be subject to additional U.S. income taxes. Determination of the amount of
unrecognized deferred income tax liability related to these earnings is not practicable. Income before income taxes from foreign operations for 2008, 2007 and
2006 was $1.1 billion, $1.2 billion and $835.9 million, respectively.
EMC adopted FIN No. 48 at the beginning of fiscal year 2007. As a result of implementing FIN No. 48, we recognized a cumulative effect adjustment of
$6.5 million to increase the January 1, 2007 retained earnings balance and decrease our accrued tax liabilities. Prior to the adoption of FIN No. 48, our policy
was to classify accruals for uncertain positions as a
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