MasterCard 2014 Annual Report Download - page 80

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
78
During the fourth quarter of 2014, the Company implemented an initiative to better align its legal entity and tax structure with its
operational footprint outside of the U.S. This initiative resulted in a one-time taxable gain in Belgium relating to the transfer of
intellectual property to a related foreign entity in the United Kingdom. Management believes this improved alignment will result
in greater flexibility and efficiency with regard to the global deployment of cash, as well as ongoing benefits in the Company’s
effective income tax rate. The Company recorded a deferred charge related to the income tax expense on intercompany profits
that resulted from the transfer. The tax associated with the transfer is deferred and amortized utilizing a 25-year life. This deferred
charge is included in other current assets and other assets on our consolidated balance sheet at December 31, 2014 in the amounts
of $18 million and $407 million, respectively.
In 2010, in connection with the expansion of the Company’s operations in the Asia Pacific, Middle East and Africa region, the
Company’s subsidiary in Singapore, MasterCard Asia Pacific Pte. Ltd. (“MAPPL”) received an incentive grant from the Singapore
Ministry of Finance. The incentive had provided MAPPL with, among other benefits, a reduced income tax rate for the 10-year
period commencing January 1, 2010 on taxable income in excess of a base amount. The Company continued to explore business
opportunities in this region, resulting in an expansion of the incentives being granted by the Ministry of Finance, including a further
reduction to the income tax rate on taxable income in excess of a revised fixed base amount commencing July 1, 2011 and continuing
through December 31, 2025. Without the incentive grant, MAPPL would have been subject to the statutory income tax rate on its
earnings. For 2014, 2013 and 2012, the impact of the incentive grant received from the Ministry of Finance resulted in a reduction
of MAPPL’s income tax liability of $38 million, or $0.03 per diluted share, $76 million, or $0.06 per diluted share, and $64 million,
or $0.05 per diluted share, respectively.
Deferred Taxes
Deferred tax assets and liabilities represent the expected future tax consequences of temporary differences between the carrying
amounts and the tax basis of assets and liabilities. The components of deferred tax assets and liabilities at December 31 are as
follows:
2014 2013
(in millions)
Deferred Tax Assets
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 177 $ 124
Compensation and benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262 201
State taxes and other credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 99
Net operating losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 39
Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 46
Less: Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41) (28)
Total Deferred Tax Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557 481
Deferred Tax Liabilities
Prepaid expenses and other accruals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 50
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 97
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 116
Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 37
Total Deferred Tax Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283 300
Net Deferred Tax Assets 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 274 $ 181
1 $7 million and $5 million of current deferred tax liabilities have been included in other current liabilities on the balance sheet at December 31, 2014
and 2013, respectively.