Priceline 2011 Annual Report Download - page 92

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ability to generate sufficient future taxable income.
IRC Section 382 imposes limitations on the availability of a company’s net operating losses after a more than 50
percentage point ownership change occurs. The IRC Section 382 limitation is based upon certain conclusions pertaining to the
dates of ownership changes and the value of the Company on the dates of the ownership changes. It was determined that
ownership changes, as defined in IRC Section 382, occurred in 2000 and 2002. The amount of the Company’s net operating
losses incurred prior to each ownership change is limited based on the value of the Company on the respective dates of
ownership change. It is estimated that the remaining effect of IRC Section 382 will generally limit the total cumulative amount
of net operating loss available to offset future taxable income to approximately $1.2 billion. Pursuant to IRC Section 382,
subsequent ownership changes could further limit this amount.
The Company periodically evaluates the likelihood of the realization of deferred tax assets, and reduces the carrying
amount of these deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. The
Company considers many factors when assessing the likelihood of future realization of the deferred tax assets, including its
recent cumulative earnings experience by taxing jurisdiction, expectations of future income, the carryforward periods available
for tax reporting purposes, and other relevant factors. In the three months ended September 30, 2009, management concluded
that it was more likely than not that additional deferred tax assets would be realized. This determination was based upon actual
and projected future operating results in our domestic business, as well as recent stabilization in U.S. economic conditions,
including hotel occupancy rates and average daily rates. Accordingly, the Company recorded a non-cash income tax benefit of
$182.3 million in the year ended December 31, 2009, resulting from the reversal of the remaining portion of its valuation
allowance on its deferred tax assets related to NOLs generated from domestic operating losses. In addition, during the year
ended December 31, 2009, the Company recorded a non-cash income tax benefit of $1.0 million resulting from a reversal of a
valuation allowance on its deferred tax assets related to foreign operating loss carryforwards based on the Company’s
assessment that it is more likely than not that these deferred tax assets will be realized.
The deferred tax asset at December 31, 2011 and 2010 amounted to $147.8 million and $222.0 million, respectively,
net of the valuation allowance recorded. The short-term and long term portion at December 31, 2011 was $36.8 million and
$111.1 million, respectively, compared with $70.6 million and $151.4 million, respectively, at December 31, 2010.
The Company has recorded a non-current foreign deferred tax liability in the amount of $47.0 million and $56.4
million at December 31, 2011 and 2010, respectively, primarily related to the assignment of fair value to certain purchased
identifiable intangible assets associated with various acquisitions.
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities at
December 31, 2011 and 2010 are as follows (in thousands):
Deferred tax assets/(liabilities):
Net operating loss carryforward — U.S.
IRC 382 Disallowance
Net operating loss carryforward — Foreign
Fixed assets
Investments
Accrued expenses
Stock-based compensation and other stock based payments
Other
Subtotal
Discount on convertible notes
Intangible assets and other
Less valuation allowance on deferred tax assets
Net deferred tax assets(1)
2011
$ 788,490
(498,249)
290,241
20,437
927
5,189
13,275
10,727
8,884
349,680
(31,032)
(48,753)
(171,755)
$ 98,140
2010
$ 875,316
(498,249)
377,067
22,543
3,089
5,127
12,018
13,724
9,671
443,239
(39,163)
(60,057)
(179,991)
$ 164,028
(1) Includes current deferred tax liabilities of $2.7 million and $1.5 million as of December 31, 2011 and 2010, respectively,
which are reported in "Accrued expenses and other current liabilities" on the Consolidated Balance Sheets.