SanDisk 2007 Annual Report Download - page 125

Significant components of the Company’s deferred tax assets as of December 30, 2007 and December 31, 2006
were as follows (in thousands):
December 30,
2007
December 31,
2006
Deferred tax assets:
Deferred revenue recognized for tax purposes .................. $ 48,932 $ 57,435
Accruals and reserves not currently deductible.................. 170,279 148,427
Depreciation and amortization not currently deductible ........... 56,967 44,807
Deductible original issue discount ........................... 119,358 136,715
Deductible share-based compensation ........................ 37,959 19,840
Net operating loss and tax credit carryforwards ................. 48,731 53,018
Other ................................................ 28,709 27,995
Valuation allowance on deferred tax assets .................... (67,354) (60,119)
Total deferred tax assets .................................... $443,581 $ 428,118
Deferred tax liabilities:
Acquired intangibles ..................................... $ (42,477) $ (63,772)
Unrealized gain on investments ............................. (23,553) (28,285)
U.S. taxes provided on unremitted earnings of foreign subsidiaries . . . (62,647) (88,590)
Total deferred tax liabilities ................................. (128,677) (180,647)
Net deferred tax assets ..................................... $314,904 $ 247,471
Valuation allowance of $67.4 million and $60.1 million was provided on gross deferred tax assets at
December 30, 2007 and December 31, 2006, respectively, based upon available evidence that it is more likely
than not that some of the deferred tax assets may not be realized. The valuation allowance increased $7.3 million in
fiscal year 2007 from fiscal year 2006, primarily due to tax credits and net operating losses in jurisdictions where
realization is not “more likely than not.” Should the Company have the ability to benefit from the valuation
allowance in future periods, approximately $48 million would be credited to goodwill while the remainder would
benefit the provision for income taxes.
The Company has federal, state before federal benefit, and foreign net operating loss carryforwards of
approximately $83 million, $28 million and $50 million, respectively. Some net operating losses will begin to
expire in fiscal year 2010, if not utilized. The Company also has federal and state research credit carryforwards of
approximately $9 million and $10 million before federal benefit, respectively. Some credit carryforwards will begin
to expire in fiscal year 2008, if not utilized. Some of these carryforwards are subject to annual limitations, including
Section 382 of the Internal Revenue Code of 1986, as amended, for United States tax purposes and similar state
provisions.
No provision has been made for United States income taxes or foreign withholding taxes on approximately
$95 million of cumulative unremitted earnings of certain foreign subsidiaries as of December 30, 2007, since the
Company intends to indefinitely reinvest these earnings outside the United States. If these earnings were distributed
to the United States, the Company would be subject to additional United States income taxes and foreign
withholding taxes (subject to adjustment for foreign tax credits). As of December 30, 2007, the unrecognized
deferred tax liability for these earnings was approximately $31 million.
The Company adopted FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes,
an interpretation of FASB Statement No. 109, on January 1, 2007. As a result of the adoption, the Company
recognized an increase of approximately $1.0 million in the liability for unrecognized tax benefits, which was
F-29
Notes to Consolidated Financial Statements — (Continued)