Goldman Sachs 2013 Annual Report Download - page 200

Notes to Consolidated Financial Statements
The firm has recorded deferred tax assets of $232 million
and $222 million as of December 2013 and
December 2012, respectively, in connection with U.S.
federal, state and local and foreign net operating loss
carryforwards. The firm also recorded a valuation
allowance of $45 million and $60 million as of
December 2013 and December 2012, respectively, related
to these net operating loss carryforwards.
As of December 2013, the U.S. federal and foreign net
operating loss carryforwards were $38 million and
$854 million, respectively. If not utilized, the U.S. federal
net operating loss carryforward will begin to expire in
2014. The foreign net operating loss carryforwards can be
carried forward indefinitely. State and local net operating
loss carryforwards of $781 million will begin to expire in
2014. If these carryforwards expire, they will not have a
material impact on the firm’s results of operations. The firm
had no foreign tax credit carryforwards and no related net
deferred income tax assets as of December 2013 or
December 2012.
The firm had no capital loss carryforwards and no related
net deferred income tax assets as of December 2013 or
December 2012.
The valuation allowance increased by $15 million and
$103 million during 2013 and 2012, respectively. The
increase in 2013 was primarily due to an increase in
deferred tax assets from which the firm does not expect to
realize any benefit. The increase in 2012 was primarily due
to the acquisition of deferred tax assets considered more
likely than not to be unrealizable.
The firm permanently reinvests eligible earnings of certain
foreign subsidiaries and, accordingly, does not accrue any
U.S. income taxes that would arise if such earnings were
repatriated. As of December 2013 and December 2012, this
policy resulted in an unrecognized net deferred tax liability
of $4.06 billion and $3.75 billion, respectively, attributable
to reinvested earnings of $22.54 billion and
$21.69 billion, respectively.
Unrecognized Tax Benefits
The firm recognizes tax positions in the financial statements
only when it is more likely than not that the position will be
sustained on examination by the relevant taxing authority
based on the technical merits of the position. A position
that meets this standard is measured at the largest amount
of benefit that will more likely than not be realized on
settlement. A liability is established for differences between
positions taken in a tax return and amounts recognized in
the financial statements.
As of December 2013 and December 2012, the accrued
liability for interest expense related to income tax matters
and income tax penalties was $410 million and
$374 million, respectively. The firm recognized $53 million
for 2013, $95 million for 2012 and $21 million for 2011 of
interest and income tax penalties. It is reasonably possible
that unrecognized tax benefits could change significantly
during the twelve months subsequent to December 2013
due to potential audit settlements, however, at this time it is
not possible to estimate any potential change.
198 Goldman Sachs 2013 Annual Report