GameStop 2007 Annual Report Download - page 93

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The difference in income tax provided and the amounts determined by applying the statutory rate to income
before income taxes resulted from the following:
52 Weeks
Ended
February 2,
2008
53 Weeks
Ended
February 3,
2007
52 Weeks
Ended
January 28,
2006
Federal statutory tax rate ........................... 35.0% 35.0% 35.0%
State income taxes, net of federal effect ................ 0.5 2.0 1.1
Foreign income taxes .............................. (0.8) 0.7 1.4
Other (including permanent differences) ................ (0.1) 0.1 (0.5)
34.6% 37.8% 37.0%
The Company’s effective tax rate decreased from 37.8% in the 53 weeks ended February 3, 2007 to 34.6% in
the 52 weeks ended February 2, 2008 primarily due to the release of valuation allowances on foreign net operating
losses and the recognition of foreign tax credits not previously benefited. Valuation allowances were recorded in
earlier years against foreign net operating losses generated in subsidiaries for which profitability could not be
reasonably foreseen. The valuation allowances on foreign net operating losses were released during the current year
upon such subsidiaries attaining profitability.
Differences between financial accounting principles and tax laws cause differences between the bases of
certain assets and liabilities for financial reporting purposes and tax purposes. The tax effects of these differences, to
the extent they are temporary, are recorded as deferred tax assets and liabilities under SFAS 109 and consisted of the
following components:
February 2,
2008
February 3,
2007
(In thousands)
Deferred tax asset:
Fixed assets ............................................. $21,395 $ 12,202
Inventory obsolescence reserve . .............................. 16,823 14,573
Deferred rents ............................................ 11,585 8,131
Stock-based compensation ................................... 16,347 7,842
Net operating losses ....................................... 17,801 12,243
Other .................................................. 12,455 13,151
Total deferred tax assets .................................. 96,406 68,142
Deferred tax liabilities:
Goodwill ............................................... (30,280) (23,504)
Prepaid expenses .......................................... (4,110) (2,664)
Other .................................................. (8,203) (1,312)
Total deferred tax liabilities . . .............................. (42,593) (27,480)
Net.................................................. $53,813 $ 40,662
Financial statements:
Current deferred tax assets .................................... $27,481 $ 34,858
Non-current deferred tax assets . . . .............................. $26,332 $ 5,804
F-26
GAMESTOP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)