Google 2008 Annual Report Download - page 110

Google Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
any foreign income taxes previously paid on these earnings. As of December 31, 2008, the cumulative amount of
earnings upon which U.S. income taxes have not been provided is approximately $7.7 billion. 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,
2007 2008
Deferred tax assets:
Stock-based compensation ................................................. $ 118,297 $ 211,311
State taxes ............................................................... 86,256 132,827
Capital loss from impairment of equity investments ............................ — 446,770
Settlement with the Authors Guild and AAP ................................... — 38,810
Depreciation .............................................................. 53,900 19,666
Vacation accruals .......................................................... 18,868 24,903
Deferred rent .............................................................. 17,498 38,048
Accruals and reserves not currently deductible ................................ 9,824 32,080
Acquired net operating losses ............................................... — 60,306
Other ..................................................................... 14,674 10,442
Total deferred tax assets ............................................... 319,317 1,015,163
Valuation allowance ................................................... — (364,529)
Total deferred tax assets net of valuation allowance ....................... 319,317 650,634
Deferred tax liabilities:
Identified intangibles ....................................................... (127,700) (249,679)
Undistributed earnings of foreign subsidiaries ................................. (55,329) —
Unrealized gains on investments and other ................................... (30,187) (123,231)
Other ..................................................................... (4,344) (4,134)
Total deferred tax liabilities ............................................. (217,560) (377,044)
Net deferred tax assets ......................................................... $ 101,757 $ 273,590
As of December 31, 2008, our federal and state net operating loss carryforwards for income tax purposes
were approximately $186.7 million and $92.6 million. If not utilized, the federal net operating loss carryforwards will
begin to expire in 2025 and the state net operating loss carryforwards will begin to expire in 2011. The net
operating loss carryforwards are subject to various limitations under Section 382 of the Internal Revenue Code.
On October 3, 2008, the United States enacted a law, the “Emergency Economic Stabilization Act of 2008,”
which contains the “Tax Extenders and Alternative Minimum Tax Relief Act of 2008”. Under this act, the federal
research and development credit was retroactively extended for amounts paid or incurred after December 31,
2007 and before January 1, 2010. During the fourth quarter, there were various changes to the income tax laws in
the states where we conduct business. The tax effects of these changes were determined and recognized in the
fourth quarter.
In the fourth quarter of 2008, we recorded $1.09 billion impairment charge related primarily to our
investments in AOL and Clearwire. For tax purposes, the impairment generated an equal amount of capital loss of
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