MasterCard 2015 Annual Report Download - page 82

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
76
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, 2015 in the
amounts of $15 million and $352 million, respectively. The comparable amounts included in other current assets and other
assets were $18 million and $407 million, respectively, at December 31, 2014, with the difference driven by changes in foreign
exchange rates and current period amortization.
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 2015, 2014 and 2013, the impact of the incentive grant received from the Ministry of Finance
resulted in a reduction of MAPPL’s income tax liability of $47 million, or $0.04 per diluted share, $40 million, or $0.03 per diluted
share, and $76 million, or $0.06 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:
2015 12014
(in millions)
Deferred Tax Assets
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 169 $ 177
Compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242 262
State taxes and other credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 65
Net operating losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67 56
Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 38
Less: Valuation allowance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (54) (41)
Total Deferred Tax Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 568 557
Deferred Tax Liabilities
Prepaid expenses and other accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 58
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 92
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 115
Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 18
Total Deferred Tax Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330 283
Net Deferred Tax Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 238 $ 274
1 As described within Recent Accounting Pronouncements section of Note 1. Summary of Significant Accounting Policies, the Company has early
adopted recent guidance and now reflects 2015 deferred taxes as non-current deferred taxes within the Consolidated Balance Sheet.
The 2015 and 2014 valuation allowances relate primarily to the Company’s ability to recognize tax benefits associated with certain
foreign net operating losses. The recognition of these benefits is dependent upon the future taxable income in such foreign
jurisdictions and the ability under tax law in these jurisdictions to utilize net operating losses following a change in control.