Morgan Stanley 2014 Annual Report Download - page 291

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company had tax credit carryforwards for which a related deferred tax asset of $3,740 million and $4,932
million was recorded at December 31, 2014 and December 31, 2013, respectively. These carryforwards are
subject to annual limitations on utilization, with a significant amount scheduled to expire in 2020, if not utilized.
The Company believes the recognized net deferred tax asset (after valuation allowance) of $7,206 million is
more likely than not to be realized based on expectations as to future taxable income in the jurisdictions in which
it operates.
The Company recorded net income tax provision (benefit) to Paid-in capital related to employee stock-based
compensation transactions of $(6) million, $121 million, and $114 million in 2014, 2013, and 2012, respectively.
Cash payments for income taxes were $886 million, $930 million, and $388 million in 2014, 2013, and 2012,
respectively.
The following table presents the U.S. and non-U.S. components of income from continuing operations before
income tax expense (benefit) for 2014, 2013, and 2012, respectively:
2014 2013 2012
(dollars in millions)
U.S. ................................................................ $1,805 $1,738 $(1,165)
Non-U.S.(1) .......................................................... 1,786 2,820 1,761
$3,591 $4,558 $ 596
(1) Non-U.S. income is defined as income generated from operations located outside the U.S.
Investments in Qualified Affordable Housing Projects. In January 2014, the FASB issued an update providing
guidance on accounting for investments in flow-through limited liability entities that manage or invest in affordable
housing projects that qualify for the low-income housing tax credit. This guidance permits the Company to make an
accounting policy election to account for its investments in qualified affordable housing projects using the
proportional amortization method if certain conditions are met. Under the proportional amortization method, an
entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and
recognizes the investment amortization in the Company’s consolidated statement of income as a component of
Provision for (benefit from) income taxes. As a practical expedient, an investor is permitted to amortize the initial
cost of the investment in proportion to only the tax credits allocated to the investor if the investor reasonably expects
that doing so would produce a measurement that is substantially similar.
The Company made the accounting policy election described above and early-adopted the guidance with an
effective date of April 1, 2014. As a result of adopting the guidance, the Company made retrospective
adjustments to remove from Other revenues previously recorded losses recognized under the equity method of
accounting and record the amortization expense computed under the proportional amortization method to
Provision for (benefit from) income taxes for all prior periods presented. The impact of early adoption on
retained earnings was immaterial. The Company removed $(18) million from Other revenues and recorded $18
million to Provision for (benefit from) income taxes for 2014. Also, the Company removed $(76) million from
Other revenues and recorded $76 million to Provision for (benefit from) income taxes in both 2013 and 2012.
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