Google 2010 Annual Report Download - page 91

The reconciliation of federal statutory income tax rate to our effective income tax rate is as follows (in
millions):
Year ended December 31,
2008 2009 2010
Expected provision at federal statutory tax rate (35%) .......................... $2,049 $ 2,933 $ 3,779
Statetaxes,netoffederalbenefit............................................. 263 302 322
Stock-basedcompensationexpense.......................................... 91 63 79
Changeinvaluationallowance ............................................... 313 (41) (34)
Foreign rate differential ..................................................... (1,020) (1,339) (1,769)
Federal research credit ...................................................... (52) (56) (84)
Tax exempt interest ......................................................... (52) (15) (12)
Otherpermanentdifferences ................................................ 34 14 10
Provision for income taxes ................................................... $1,626 $ 1,861 $ 2,291
We have not provided U.S. income taxes and foreign withholding taxes on the undistributed earnings of
foreign subsidiaries as of December 31, 2010 because we intend to permanently reinvest such earnings outside
the U.S. If these foreign earnings were to be repatriated in the future, the related U.S. tax liability may be reduced by
any foreign income taxes previously paid on these earnings. As of December 31, 2010, the cumulative amount of
earnings upon which U.S. income taxes have not been provided is approximately $17.5 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 millions):
As of December 31,
2009 2010
Deferred tax assets:
Stock-basedcompensationexpense ................................................ $ 274 $299
Statetaxes....................................................................... 162 207
Capital loss from impairment of equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420 292
SettlementwiththeAuthorsGuildandAAP .......................................... 39 39
Depreciationandamortization ...................................................... 135 20
Vacationaccruals ................................................................. 27 35
Deferredrent ..................................................................... 44 34
Accruals and reserves not currently deductible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 42
Unrealized losses on investments and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 95
Acquirednetoperatinglosses ...................................................... 61 132
Other ............................................................................ 17 26
Total deferred tax assets ...................................................... 1,447 1,221
Valuation allowance .......................................................... (326) (292)
Total deferred tax assets net of valuation allowance .............................. 1,120 929
Deferred tax liabilities:
Identified intangibles .............................................................. (210) (308)
Other prepaids .................................................................... 0 (95)
Other ............................................................................ (3) (2)
Total deferred tax liabilities .................................................... (213) (405)
Netdeferredtaxassets................................................................. $ 907 $ 524
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