LinkedIn 2013 Annual Report Download - page 104

benefit of $15.5 million in the twelve months ended December 31, 2013 for qualifying amounts incurred in
2012.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes. The following table presents the significant components of the Company’s deferred tax assets
and liabilities for the periods presented (in thousands):
December 31,
2013 2012
Deferred tax assets:
Accruals and reserves ............................... $34,801 $ 19,531
Net operating loss carryforwards ....................... 2,129 1,707
Tax credit carryforwards ............................. 23,917 12,405
Stock-based compensation ............................ 22,030 12,107
Other .......................................... 1,298 1,407
Total deferred tax assets ........................... 84,175 47,157
Less valuation allowance .............................. (27,302) (15,201)
Net deferred tax assets .............................. 56,873 31,956
Deferred tax liability:
Prepaid expenses .................................. (3,485) (1,974)
Intangible assets ................................... (4,905) (7,518)
Depreciation ..................................... (30,444) (38,206)
Other .......................................... (677) (282)
Total deferred tax liabilities ......................... (39,511) (47,980)
Total net deferred tax assets (liabilities) .................... $17,362 $(16,024)
Realization of deferred tax assets is dependent upon the generation of future taxable income, if any,
the timing and amount of which are uncertain. Due to the history of losses the Company has generated in
the past in certain jurisdictions, the Company believes that it is more likely than not that California and
certain international deferred tax assets will not be realized as of December 31, 2013. Accordingly, the
Company has recorded a valuation allowance on such deferred tax assets. The valuation allowance
increased by $12.1 million and $8.8 million during the year ended December 31, 2013 and 2012,
respectively. There are no material decreases in valuation allowance in other jurisdictions and the increase
in valuation allowance for 2013 is primarily related to California research and development credits.
Pursuant to authoritative guidance, the benefit of stock options will only be recorded to stockholders’
equity when cash taxes payable is reduced. As of December 31, 2013, the portion of net operating loss
carryforwards and credit carryforwards related to stock options is approximately $366.3 million
tax-effected. This amount will be credited to stockholders’ equity when it is realized on the tax return.
As of December 31, 2013, the Company had net operating loss carryforwards for federal income tax
return purposes of approximately $870.4 million, which expire at various dates beginning in the year 2023,
if not utilized. The Company had net operating loss carryforwards of approximately $551.8 million for
California income tax return purposes and approximately $571.9 million for other state income tax return
purposes which expire at various dates beginning in the year 2013, if not utilized.
As of December 31, 2013, the Company had research and development credit carryforwards for
federal income tax return purposes of approximately $57.0 million, which expire at various dates beginning
in the year 2023, if not utilized. The Company had research and development credit carryforwards for
state income tax return purposes of approximately $48.3 million, which can be carried forward indefinitely.
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