Polaris 2015 Annual Report Download - page 89

distribute these earnings, it would be subject to both U.S. income taxes (subject to an adjustment for foreign
tax credits reflecting the amounts paid to non-U.S. taxing authorities) and withholding taxes payable to the
non-U.S. countries. Determination of the unrecognized deferred U.S. income tax liability related to these
undistributed earnings is not practicable due to the complexities associated with this hypothetical calculation.
Polaris utilizes the liability method of accounting for income taxes whereby deferred taxes are determined
based on the estimated future tax effects of differences between the financial statement and tax bases of assets
and liabilities given the provisions of enacted tax laws.
In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. This
ASU requires entities to present deferred tax assets and deferred tax liabilities as noncurrent in the
consolidated balance sheet. The Company has early adopted the requirements of ASU No. 2015-17, and
applied the amended provisions prospectively. The net deferred income taxes consist of the following (in
thousands):
December 31,
2015 2014
Current deferred income taxes:
Inventories ................................. —$ 9,034
Accrued expenses ............................ —104,279
Derivative instruments ......................... —864
Total current ................................ —114,177
Noncurrent deferred income taxes:
Inventories ................................. $ 10,047 —
Accrued expenses ............................ 107,767 —
Derivative instruments ......................... (1,112) —
Cost in excess of net assets of business acquired ...... (7,956) (13,111)
Property and equipment ....................... (28,853) (28,921)
Compensation payable in common stock ............ 67,222 58,446
Net operating loss carryforwards and impairments ..... 12,374 12,693
Valuation allowance .......................... (6,684) (6,097)
Total noncurrent ............................. 152,805 23,010
Total net deferred income tax asset ................... $152,805 $137,187
At December 31, 2015, the Company had available unused international and acquired federal net operating
loss carryforwards of $38,039,000. The net operating loss carryforwards will expire at various dates from 2016
to 2034, with certain jurisdictions having indefinite carryforward terms.
Polaris classified liabilities related to unrecognized tax benefits as long-term income taxes payable in the
accompanying consolidated balance sheets in accordance with ASC Topic 740. Polaris recognizes potential
interest and penalties related to income tax positions as a component of the provision for income taxes on the
consolidated statements of income. Reserves related to potential interest are recorded as a component of
long-term income taxes payable. The entire balance of unrecognized tax benefits at December 31, 2015, if
recognized, would affect the Company’s effective tax rate. The Company does not anticipate that total
unrecognized tax benefits will materially change in the next twelve months. Tax years 2009 through 2015
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