Intel 1995 Annual Report Download - page 26

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities at fiscal year-ends were as follows:
U.S. income taxes were not provided for on a cumulative total of approximately $615 million of undistributed earnings for certain non-U.S.
subsidiaries. The Company intends to reinvest these earnings indefinitely in operations outside the United States.
The Company's U.S. income tax returns for the years 1978 through 1987 have been examined by the Internal Revenue Service (IRS). In 1989,
the Company received a notice of proposed deficiencies from the IRS totaling $36 million, exclusive of penalties and interest, for the years
1978 through 1982. These proposed deficiencies relate primarily to operations in Puerto Rico. In 1989, the Company filed a petition in the U.S.
Tax Court contesting these proposed deficiencies and subsequently reached settlement of certain issues with the IRS. In 1993, the U.S. Tax
Court ruled in favor of the Company on an export source issue and for the IRS on another, smaller issue. The IRS appealed the decision to the
United States Court of Appeals for the Ninth Circuit, and the Company filed a cross-appeal of the decision. In 1995, the Court of Appeals
affirmed the decision of the Tax Court. The IRS has subsequently requested a re-hearing. The Company has also received an examination
report for the years 1983 through 1987. Intel has lodged a protest, which relates solely to the export source issue referenced above, to the IRS
Appeals Office, but no decisions have been reached.
The Company's U.S. income tax returns for the years 1988 through 1990 are presently under examination by the IRS. Final proposed
adjustments have not yet been received for these years. Management believes that adequate amounts of tax and related interest and penalties, if
any, have been provided for any adjustments that may result from unsettled portions of the 1978-1987 cases or the years now under
examination.
Employee benefit plans
Stock option plans. Intel has a stock option plan (hereafter referred to as the EOP Plan) under which officers, key employees and non-
employee
directors may be granted options to purchase shares of the Company's authorized but unissued Common Stock. The Company also has an
Executive Long-Term Stock Option Plan (ELTSOP) under which certain key executive officers may be granted options to purchase shares of
the Company's authorized but unissued Common Stock. Under all plans, the option purchase price is not less than fair market value at the date
of grant. The Company accounts for stock options in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees." In
accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," the Company intends to continue to apply APB No. 25 for
purposes of determining net income and to adopt the pro forma disclosure requirements for fiscal 1996.
Options currently expire no later than ten years from the grant date. Proceeds received by the Company from exercises are credited to Common
Stock and capital in excess of par value. Additional information with respect to EOP Plan activity was as follows:
State taxes, net of federal
benefits 132 105 98
Other (33) (51) (98)
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Provision for taxes $ 2,072 $ 1,315 $ 1,235
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(In millions) 1995 1994
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Deferred tax assets
Accrued compensation and benefits $ 61 $ 49
Deferred income 127 127
Inventory valuation and related reserves 104 255
Interest and taxes 61 54
Other, net 55 67
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408 552
Deferred tax liabilities
Depreciation (475) (338)
Unremitted earnings of certain subsidiaries (116) (51)
Other, net (29) --
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(620) (389)
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Net deferred tax (liability) asset $ (212) $ 163
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Outstanding options
Shares -----------------------
available Number Aggregate
(In millions) for options of shares price
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December 26, 1992 65.4 73.6 $ 669
Grants (15.2) 15.2 357
Exercises -- (9.0) (56)
Cancellations 1.8 (1.8) (24)
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December 25, 1993 52.0 78.0 946
Grants (12.0) 12.0 397
Exercises -- (8.2) (54)
Cancellations 1.6 (1.6) (33)
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December 31, 1994 41.6 80.2 1,256