Groupon 2011 Annual Report Download - page 103

GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The deferred tax amounts have been classified on the consolidated balance sheets as of December 31 as follows (in thousands):
In determining the need for a valuation allowance, the Company weighs both positive and negative evidence in the various taxing jurisdictions in which
it operates to determine whether it is more likely than not that its deferred tax assets are recoverable. In assessing the ultimate realizability of its net deferred tax
assets, the Company considers several factors including cumulative earnings by jurisdiction, expected future taxable income by jurisdiction, the carryforward
periods available for tax reporting purposes, the ability to carryback losses, available tax strategies and other factors. At December 31, 2010 and 2011, the
Company recorded a valuation allowance of $56.0 and $128.2 million, respectively, against its domestic and foreign net deferred tax assets, as it believes it is
more likely than not that these benefits will not be realized.
The Company had $6.3 million and $12.0 million of federal and state net operating loss carryforwards, at December 31, 2010 and 2011, respectively,
which will begin expiring in 2016. In addition, at December 31, 2010 and 2011, the Company had $0.3 million and $0.3 million of federal tax credit
carryforwards, respectively, which will expire beginning in 2021. At December 31, 2010 and 2011, the Company had $223.1 million and $497.9 million of
foreign net operating loss carryforwards, a significant portion of which carryforward for an indefinite period.
The Company is subject to taxation in the United States, various state and foreign jurisdictions. Significant judgment is required in determining the
worldwide provision for income taxes and recording the related income tax assets and liabilities. The Company's practice for accounting for uncertainty in
income taxes is to recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not
sustain the position following an audit. For tax positions meeting the more-likely-than-
not criteria, the amount recognized in the financial statements is the
largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company
97
2010 2011
Deferred tax assets:
Reserves and allowances
$
5,691
$
77,910
Foreign exchange loss
226
437
Deferred rent
349
3,705
Net operating loss and tax credit carryforwards
74,283
143,204
Stock1based compensation
2,138
15,489
Other
—
333
Total deferred tax assets
82,687
241,078
Less valuation allowance
(55,956
)
(128,215
)
Deferred tax assets, net of valuation allowance
26,731
112,863
Deferred tax liabilities:
Unearned revenue for tax
(17,525
)
(116,287
)
Intangible assets
(11,249
)
(7,715
)
Prepaid and Other Expense
—
(
1,520
)
Fixed assets
(1,227
)
(6,263
)
Net deferred tax liability
$
(3,270
)
$
(18,922
)
2010 2011
Assets:
Deferred income taxes, current
$
—
$
19,243
Deferred income taxes, non-current
14,544
46,104
Liabilities:
Deferred income taxes, current
(17,210
)
(76,841
)
Deferred income taxes, non-current
(604
)
(7,428
)
Total
$
(3,270
)
$
(18,922
)