OfficeMax 2005 Annual Report Download - page 76

The tax effects of temporary differences that give rise to significant portions of the deferred tax
assets and deferred tax liabilities are presented below:
December 31
2005 2004
(thousands)
Current deferred tax assets (liabilities) attributable to
Accrued expenses .......................................... 41,157 42,815
Allowances for receivables .................................... 18,410 23,546
Compensation and benefits ................................... 13,473 31,275
Inventory ................................................. 10,290 38,953
Other temporary differences ................................... 19,922 168
Contingency reserves ........................................ 2,568 943
Total current net deferred tax assets ............................ $105,820 $137,700
Noncurrent deferred tax assets (liabilities) attributable to
Deferred gain(a) ............................................ (473,838) (457,705)
Alternative minimum tax and other credit carryforwards ................ 234,222 213,017
Compensation and benefits ................................... 158,853 165,222
Net operating loss carryforwards ................................ 110,788 59,671
Contingency reserves ........................................ 57,851 86,902
Investments ............................................... 22,852 (1,569)
Goodwill ................................................. (31,060) (31,887)
Other non-current liabilities .................................... 2,091 22,240
Undistributed earnings ....................................... (4,689) —
Foreign deferred liabilities (net) ................................. (4,682) (4,445)
Deferred charges ........................................... 3,056 (10,922)
Property and equipment ...................................... 1,890 (17,100)
Other temporary differences ................................... 429 10,038
77,763 33,462
Less: Valuation allowance ..................................... (21,533) —
Total noncurrent net deferred tax assets ......................... $ 56,230 $ 33,462
(a) Includes $543.8 million related to the gain on the sale of the Company’s timberlands to affiliates of Boise Cascade
L.L.C. that was deferred until 2019 for tax purposes.
In assessing the realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred 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 the
Company will realize the benefits of these deductible differences, except for certain state net
operating losses as noted below. The amount of the deferred tax asset considered realizable,
however, could be reduced in the near term if estimates of future taxable income during the
carryforward period are reduced.
The Company has established a valuation allowance of $21.5 million related to net operating
loss carryforwards in jurisdictions where the Company has substantially reduced operations
because management believes it is more likely than not that these items will either expire before the
Company is able to realize their benefits, or that future deductibility is uncertain. Periodically, the
valuation allowance is reviewed and adjusted based on management’s assessments of realizable
deferred tax assets.
72