NetSpend 2012 Annual Report Download - page 60

Temporary differences between the financial
statement carrying amounts and tax bases of assets
and liabilities that give rise to significant portions of
the net deferred tax liability at December 31, 2012
and 2011 relate to the following:
At December 31,
(in thousands) 2012 2011
Deferred income tax assets:
Net operating loss and income
tax credit carryforwards .....$ 24,405 25,937
Allowances for doubtful
accounts and billing
adjustments ............... 644 1,113
Deferred revenue ............ 18,645 19,031
Purchase accounting
adjustments ............... —15,889
Other, net .................. 41,348 37,123
Total deferred income tax
assets ...................... 85,042 99,093
Less valuation allowance for
deferred income tax assets . . (19,400) (19,207)
Net deferred income tax assets . . 65,642 79,886
Deferred income tax liabilities:
Excess tax over financial
statement depreciation ..... (36,682) (42,351)
Computer software
development costs ......... (39,637) (40,339)
Purchase accounting
adjustments ............... (4,514) —
Foreign currency translation . . . (8,574) (6,432)
Other, net .................. (9,150) (6,712)
Total deferred income tax
liabilities ................ (98,557) (95,834)
Net deferred income tax
liabilities ................$(32,915) (15,948)
Total net deferred tax assets
(liabilities): ..................
Current .....................$ 9,825 12,872
Noncurrent ................. (42,740) (28,820)
Net deferred income tax
liability .....................$(32,915) (15,948)
As of December 31, 2012, TSYS had recognized
deferred tax assets from net operating losses, capital
losses and federal and state income tax credit
carryforwards of $13.4 million, $1.9 million and
$9.1 million, respectively. As of December 31, 2011,
TSYS had recognized deferred tax assets from net
operating losses, capital losses and federal and state
income tax credit carry forwards of $15.5 million,
$1.9 million and $8.5 million, respectively. Some of
the net operating losses and some of the tax credits
began expiring in 2012.
In assessing the realizability of deferred income tax
assets, management considers whether it is more
likely than not that some portion or all of the deferred
income tax assets will not be realized. The ultimate
realization of deferred income tax assets is
dependent upon the generation of future taxable
income during the periods in which those temporary
differences become deductible. Management
considers the scheduled reversal of deferred tax
liabilities, projected future taxable income and tax
planning strategies in making this assessment.
Management believes it is more likely than not that
TSYS will realize the benefits of these deductible
differences, net of existing valuation allowances. The
valuation allowance for deferred tax assets was
$19.4 million and $19.2 million at December 31, 2012
and 2011, respectively. The increase in the valuation
allowance for deferred income tax assets was
$0.2 million for 2012. The increase in the valuation
allowance for deferred income tax assets was
$3.8 million for 2011. The increase relates to foreign
losses and state tax credits, which more likely than
not, will not be realized in later years.
TSYS has adopted the permanent reinvestment
exception under ASC 740, “Income Taxes,” with
respect to future earnings of certain foreign
subsidiaries. As a result, TSYS considers foreign
earnings related to these foreign operations to be
permanently reinvested. No provision for U.S. federal
and state incomes taxes has been made in our
consolidated financial statements for those non-
U.S. subsidiaries whose earnings are considered to
be reinvested. The amount of undistributed earnings
considered to be “reinvested” which may be subject
to tax upon distribution was approximately
$70.1 million at December 31, 2012. Although TSYS
does not intend to repatriate these earnings, a
distribution of these non-U.S. earnings in the form of
dividends, or otherwise, would subject the Company
to both U.S. federal and state income taxes, as
adjusted for non-U.S. tax credits, and withholding
taxes payable to the various non-U.S. countries.
Determination of the amount of any unrecognized
deferred income tax liability on these undistributed
earnings is not practicable.
TSYS is the parent of an affiliated group that files a
consolidated U.S. federal income tax return and most
state and foreign income tax returns on a separate
entity basis. In the normal course of business, the
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