Google 2009 Annual Report Download - page 111

Google Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
any foreign income taxes previously paid on these earnings. As of December 31, 2009, the cumulative amount of
earnings upon which U.S. income taxes have not been provided is approximately $12.3 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 financial 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,
2008 2009
Deferred tax assets:
Stock-based compensation expense ........................................ $ 211,311 $ 273,979
State taxes .............................................................. 132,827 161,808
Capital loss from impairment of equity investments ........................... 446,770 420,270
Settlement with the Authors Guild and AAP .................................. 38,810 38,810
Depreciation ............................................................. 19,666 134,946
Vacation accruals ........................................................ 24,903 27,471
Deferred rent ............................................................. 38,048 43,869
Accruals and reserves not currently deductible ............................... 32,080 216,456
Unrealized losses on investments and other .................................. — 51,697
Acquired net operating losses .............................................. 60,306 60,743
Other ................................................................... 10,442 16,575
Total deferred tax assets .............................................. 1,015,163 1,446,624
Valuation allowance .................................................. (364,529) (326,168)
Total deferred tax assets net of valuation allowance ...................... 650,634 1,120,456
Deferred tax liabilities:
Identified intangibles ...................................................... (249,679) (210,112)
Unrealized gains on investments and other .................................. (123,231) —
Other ................................................................... (4,134) (3,327)
Total deferred tax liabilities ............................................ (377,044) (213,439)
Net deferred tax assets ........................................................ $273,590 $ 907,017
As of December 31, 2009, our federal and state net operating loss carryforwards for income tax purposes were
approximately $187.8 million and $97.6 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 annual limitations under Section 382 of the Internal Revenue Code.
In the fourth quarter of 2008, we recorded an impairment charge of $1.09 billion related primarily to our
investments in AOL and Clearwire. For income tax purposes, the impairment will generate an equal amount of
capital loss when recognized, a portion of which was recognized in 2009. As of December 31, 2009, our federal
and state capital loss carryforwards for income tax purposes were approximately $776.0 million and $961.6
million. If not utilized, the federal capital losses will begin to expire in 2014. We believe it is more likely than not that
a portion of the capital loss carryforwards will not be realized. Therefore we have recorded a valuation allowance on
both our federal and state capital loss carryforwards in the amount of $326.2 million. We will reassess the
valuation allowance quarterly and if future evidence allows for a partial or full release of the valuation allowance, a
tax benefit will be recorded accordingly.
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