Electronic Arts 2013 Annual Report Download - page 173

Annual Report
The differences between the statutory tax expense (benefit) rate and our effective tax expense (benefit) rate,
expressed as a percentage of income (loss) before provision for (benefit from) income taxes, for the fiscal years
ended March 31, 2013, 2012 and 2011 were as follows:
Year Ended March 31,
2013 2012 2011
Statutory federal tax expense (benefit) rate ............................... 35.0% 35.0% (35.0%)
State taxes, net of federal benefit ....................................... (5.0%) (33.5%) (5.8%)
Differences between statutory rate and foreign effective tax rate .............. (15.2%) (33.5%) 12.3%
Valuation allowance ................................................. 35.0% (195.1%) 23.7%
Research and development credits ...................................... (8.6%) (39.2%) (2.4%)
Non-deductible acquisition-related costs and tax expense from integration
restructurings .................................................... — 16.7% —
Differences between book and tax on sale of strategic investments ............ (15.2%) — (8.6%)
Expiration of statutes of limitations ..................................... — (266.8%) —
Non-deductible stock-based compensation ............................... 21.5% 205.6% 12.1%
Acquisition-related contingent consideration .............................. (16.5%) — —
Other ............................................................. (1.5%) (11.4%) 2.6%
Effective tax expense (benefit) rate ................................... 29.5% (322.2%) (1.1%)
Undistributed earnings of our foreign subsidiaries amounted to approximately $1,381 million as of March 31,
2013. Those earnings are considered to be indefinitely reinvested and, accordingly, no U.S. income taxes have
been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, we would be
subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable
to various foreign countries. It is not practicable to determine the income tax liability that might be incurred if
these earnings were to be distributed.
The components of net deferred tax assets, as of March 31, 2013 and 2012 consisted of (in millions):
As of March 31,
2013 2012
Deferred tax assets:
Accruals, reserves and other expenses ......................................... $179 $182
Tax credit carryforwards .................................................... 214 201
Stock-based compensation .................................................. 46 49
Unrealized gain on marketable equity securities .................................. — 14
Net operating loss & capital loss carryforwards .................................. 286 273
Total .................................................................. 725 719
Valuation allowance ....................................................... (510) (487)
Deferred tax assets, net of valuation allowance ................................ 215 232
Deferred tax liabilities:
Depreciation .............................................................. (16) (19)
State effect on federal taxes .................................................. (56) (52)
Amortization ............................................................. (34) (44)
Prepaids and other liabilities ................................................. (11) (22)
Total .................................................................. (117) (137)
Deferred tax assets, net of valuation allowance and deferred tax liabilities ........... $ 98 $ 95
The valuation allowance increased by $23 million in fiscal year 2013, primarily due to the increase in deferred
tax assets for U.S. tax losses and tax credits that are not currently considered to be more likely than not to be
realized.
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