Mattel 2014 Annual Report Download - page 80

As of December 31, 2014, Mattel has federal and foreign loss carryforwards totaling $869.9 million and tax
credit carryforwards of $72.5 million, which excludes carryforwards that do not meet the threshold for
recognition in the financial statements. Utilization of these loss and tax credit carryforwards is subject to annual
limitations. Mattel’s loss and tax credit carryforwards expire in the following periods:
Loss
Carryforwards
Tax Credit
Carryforwards
(In thousands)
2015 – 2019 ....................................................... $251,698 $25,620
Thereafter ......................................................... 376,764 42,890
No expiration date .................................................. 241,478 3,959
Total ......................................................... $869,940 $72,469
Management considered all available evidence under existing tax law and anticipated expiration of tax
statutes and determined that a valuation allowance of $92.6 million was required as of December 31, 2014 for
those loss and tax credit carryforwards that are not expected to provide future tax benefits. In addition,
management determined that a valuation allowance of $40.7 million was required as of December 31, 2014 for
those deferred tax assets for which there is not sufficient evidence as to their ultimate utilization, primarily
related to certain foreign affiliates. Changes in the valuation allowance for 2014 primarily relate to (1) increases
in the valuation allowance related to certain MEGA Brands losses and deferred tax assets, 2014 foreign losses
without benefits, and for certain deferred tax assets and (2) decreases in the valuation allowance for expirations
and projected utilization of tax loss and tax credit carryforwards. Management believes it is more-likely-than-not
(a greater than 50 percent likelihood) that Mattel will generate sufficient taxable income in the appropriate future
periods to realize the benefit of the remaining net deferred income tax assets of $455.7 million. Changes in
enacted tax laws, audits in various jurisdictions around the world, settlements, or acquisitions could negatively
impact Mattel’s ability to fully realize all of the benefits of its remaining net deferred tax assets.
Differences between the provision for income taxes at the US federal statutory income tax rate and the
provision in the consolidated statements of operations are as follows:
For the Year
2014 2013 2012
(In thousands)
Provision at US federal statutory rate .............................. $205,419 $ 384,695 $ 330,766
(Decrease) increase resulting from:
Foreign earnings taxed at different rates, including withholding
taxes .................................................. (107,409) (165,768) (157,488)
Foreign losses without income tax benefit ....................... 20,140 3,215 1,047
State and local taxes, net of US federal benefit ................... 3,760 4,854 6,856
Adjustments to previously accrued taxes ........................ (55,026) (32,200) (16,000)
Tax restructuring .......................................... 12,400 — —
Other .................................................... 8,752 388 3,400
Provision for income taxes ....................................... $ 88,036 $ 195,184 $ 168,581
In assessing whether uncertain tax positions should be recognized in its financial statements, Mattel first
determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including
resolution of any related appeals or litigation processes, based on the technical merits of the position. In
evaluating whether a tax position has met the more-likely-than-not recognition threshold, Mattel presumes that
the position will be examined by the appropriate taxing authority that would have full knowledge of all relevant
information. For tax positions that meet the more-likely-than-not recognition threshold, Mattel measures the
amount of benefit recognized in the financial statements at the largest amount of benefit that is greater than 50
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