IBM 2005 Annual Report Download - page 80
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NotestoConsolidatedFinancialStatements
INTERNATIONALBUSINESSMACHINESCORPORATION ANDSUBSIDIARYCOMPANIES
_79
P.Taxes
(Dollarsinmillions)
FORTHEYEARENDEDDECEMBER31: 2005 2004 2003
Incomefromcontinuing
operationsbefore
incometaxes:
U.S.operations $«««7,450 $«««4,400 $«««3,662
Non-U.S.operations 4,776 6,269 5,755
Totalincomefrom
continuingoperations
beforeincometaxes $«12,226 $«10,669 $«««9,417
The continuing operations provision for income taxes by
geographicoperationsisasfollows:
(Dollarsinmillions)
FORTHEYEARENDEDDECEMBER31: 2005 2004 2003
U.S.operations $«2,988 $«1,492 $««««937
Non-U.S.operations 1,244 1,680 1,892
Totalcontinuingoperations
provisionforincometaxes $«4,232 $«3,172 $«2,829
Thecomponentsofthecontinuingoperationsprovisionfor
incometaxesbytaxingjurisdictionareasfollows:
(Dollarsinmillions)
FORTHEYEARENDEDDECEMBER31: 2005 2004 2003
U.S.federal:
Current $««««521 $«««(681) * $««««177
Deferred 1,811 1,668* 148
2,332 987 325
U.S.stateandlocal:
Current 80 36 34
Deferred 183 79 145
263 115 179
Non-U.S.:
Current 1,446 2,023 1,828
Deferred 191 47 497
1,637 2,070 2,325
Totalcontinuingoperations
provisionforincometaxes 4,232 3,172 2,829
Provisionforsocialsecurity,
realestate,personalproperty
andothertaxes** 3,501 3,449 3,372
Total taxesincludedin income
fromcontinuingoperations $«7,733 $«6,621 $«6,201
* IncludedintheU.S.federalcurrentanddeferredtaxprovisionsareabenefitof
$848 millionandachargeof$848 million,respectively,dueto a2004 Internal
RevenueServicesettlement.
** 2004and2003amountsarerestatedtoconformwiththe2005presentation.
Areconciliationofthe statutoryU.S.federaltaxratetothe
company’scontinuingoperationseffectivetaxrate isasfollows:
FORTHEYEARENDEDDECEMBER31: 2005 2004 2003
Statutoryrate 35% 35% 35%
Foreigntaxdifferential (5) (5) (5)
“Act” repatriation* 4——
Stateandlocal 111
Other —(1) (1)
Effectiverate 35% 30% 30%
* Seepage 80 foradditionalinformation.
Theeffectoftaxlawchangesondeferredtaxassetsandliabili-
tiesdid nothaveamaterialimpactonthecompany’s effective
taxrate.
Thesignificantcomponentsof deferredtaxassetsandlia-
bilities that are recorded in the Consolidated Statement of
FinancialPositionwereasfollows:
DeferredTaxAssets
(Dollarsinmillions)
ATDECEMBER31: 2005 2004
Retirement-related benefits $«««3,039 $«««3,908
Stock-basedandothercompensation 3,022 3,122
Capitalizedresearchanddevelopment 1,728 1,794
Baddebt,inventoryand
warrantyreserves 937 1,050
Deferredincome 611 612
Foreigntaxlosscarryforwards 355 298
Infrastructurereductioncharges 335 333
Capitallosscarryforwards 220 220
Alternativeminimumtaxcredits 214 1,032
Stateandlocaltaxlosscarryforwards 87 95
Other 1,649 2,265
Grossdeferredtaxassets 12,197 14,729
Less:valuationallowance 562 603
Netdeferredtaxassets $«11,635 $«14,126
DeferredTaxLiabilities
(Dollarsinmillions)
ATDECEMBER31: 2005 2004
Retirement-related benefits $«««7,267 $«7,057
Leases 964 622
Softwaredevelopmentcosts 348 381
Other 1,502 1,324
Grossdeferredtaxliabilities $«10,081 $«9,384