Google 2007 Annual Report Download - page 107

Google Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
We provide U.S. income taxes on the earnings of foreign subsidiaries unless the subsidiaries’ earnings are considered
permanently reinvested outside the U.S. To the extent that the foreign earnings previously treated as permanently
reinvested are repatriated, the related U.S. tax liability may be reduced by any foreign income taxes paid on these earnings.
As of December 31, 2007, the cumulative amount of earnings upon which U.S. income taxes have not been provided is
approximately $3,900.6 million. Determination of the amount of unrecognized deferred tax liability related to these
earnings is not practicable.
Deferred Tax Assets
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and
liabilities for financing reporting purposes and the amounts used for income tax purposes. Significant components of our
deferred tax assets and liabilities are as follows (in thousands):
As of December 31,
2006 2007
Deferred tax assets:
Stock-based compensation ................................................... $ 40,772 $ 118,297
State taxes ................................................................. — 86,256
Depreciation ............................................................... 26,009 53,900
Vacation accruals ........................................................... 11,256 18,868
Deferred Rent .............................................................. 9,565 17,498
Accruals and reserves not currently deductible .................................... 6,867 9,824
Unrealized losses on investments and other ...................................... 1,996 —
Other ..................................................................... 4,242 14,674
Total deferred tax assets ................................................. 100,707 319,317
Deferred tax liabilities:
Identified intangibles ........................................................ (107,781) (127,700)
Undistributed earnings of foreign subsidiaries .................................... — (55,329)
Unrealized gains on investments and other ....................................... — (30,187)
Other ..................................................................... (3,634) (4,344)
Total deferred tax liabilities ............................................... (111,415) (217,560)
Net deferred tax assets (liabilities) .................................................. $ (10,708) $ 101,757
As of December 31, 2007, our federal net operating loss carryforwards for income tax purposes were approximately
$22.1 million. If not utilized, the federal net operating loss carryforwards will begin to expire in 2024. The net operating
loss carryforwards are subject to various limitations under Section 382 of the Internal Revenue Code.
Uncertain Tax Positions
Effective January 1, 2007, we adopted the provisions of FIN 48. This Interpretation clarifies the accounting for
uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109 and
prescribes a recognition threshold of more-likely-than-not to be sustained upon examination. Upon adoption of FIN 48,
our policy to include interest and penalties related to gross unrecognized tax benefits within our provision for income
taxes did not change. The adjustment to retained earnings upon adoption to FIN 48 on January 1, 2007 was $2.3 million.
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