Home Depot 2005 Annual Report Download - page 63

Current deferred tax assets and current deferred tax liabilities are netted by tax jurisdiction and
noncurrent deferred tax assets and noncurrent deferred tax liabilities are netted by tax jurisdiction, and
are included in the accompanying Consolidated Balance Sheets as follows (amounts in millions):
January 29, January 30,
2006 2005
Other Current Assets $ 298 $83
Other Assets 29 30
Other Accrued Expenses (60) (34)
Deferred Income Taxes (1,023) (1,388)
Net deferred tax liabilities $ (756) $(1,309)
As a result of acquisitions that were accounted for under the purchase method of accounting, deferred
tax liabilities of $132 million were recorded in fiscal 2005 representing the difference between the book
value and the tax basis of acquired assets.
At January 29, 2006, the Company had foreign net operating loss carry-forwards to reduce future
taxable income of certain foreign subsidiaries of $5 million, which will expire at various dates from 2009
to 2015. Management has concluded that it is more likely than not that these tax benefits related to the
net operating losses will be realized and hence no valuation allowance has been provided. The
Company has not provided for U.S. deferred income taxes on $1.1 billion of undistributed earnings of
international subsidiaries because of its intention to indefinitely reinvest these earnings outside the U.S.
The determination of the amount of the unrecognized deferred U.S. income tax liability related to the
undistributed earnings is not practicable; however, unrecognized foreign income tax credits would be
available to reduce a portion of this liability.
At January 30, 2005, the Company had a valuation allowance against certain deferred tax assets totaling
$23 million. During fiscal 2005, the Company reversed this valuation allowance of $23 million because
management concluded that it is more likely than not that these tax benefits will be realized. During
fiscal 2004, the Company reversed a valuation allowance of $31 million for deferred tax assets that were
realized due to the Company’s ability to fully utilize capital losses. The likelihood of realizing the
benefit of deferred tax assets is assessed on an ongoing basis. Consequently, future changes in the
valuation allowance are possible.
The Company’s income tax returns are routinely under audit by domestic and foreign tax authorities.
These audits include questions regarding its tax filing positions, including the timing and amount of
deductions and the allocation of income among various tax jurisdictions. In 2005, the IRS completed its
examination of the Company’s U.S. federal income tax returns through fiscal 2002. As a result of these
examinations, certain deferred tax assets increased by $72 million. Certain issues relating to the
examinations of fiscal years 2001 and 2002 are under appeal, the outcome of which is not expected to
have a material impact on the Company’s financial statements.
5. EMPLOYEE STOCK PLANS
The Home Depot, Inc. 2005 Omnibus Stock Incentive Plan (‘‘2005 Plan’’) and The Home Depot, Inc.
1997 Omnibus Stock Incentive Plan (‘‘1997 Plan’’) (collectively the ‘‘Plans’’) provide that incentive stock
options, non-qualified stock options, stock appreciation rights, restricted shares, performance shares,
performance units and deferred shares may be issued to selected associates, officers and directors of
the Company. Under the 2005 Plan, the maximum number of shares of the Company’s common stock
authorized for issuance is 255 million shares, with any award other than a stock option reducing the
number of shares available for issuance by 2.11 shares. As of January 29, 2006, there were 251 million
shares available for future grant under the 2005 Plan. No additional equity awards may be issued from
the 1997 Plan after the adoption of the 2005 Plan on May 26, 2005.
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