SanDisk 2013 Annual Report Download - page 207

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
return reporting purposes. Significant components of the Company’s net deferred tax assets were as
follows (in thousands):
December 29, December 30,
2013 2012
Deferred tax assets:
Deferred income on shipments to distributors and retailers and deferred
revenue recognized for tax purposes ............................. $ 68,117 $ 46,679
Accruals and reserves not currently deductible ........................ 63,236 51,636
Depreciation and amortization not currently deductible .................. 81,245 54,474
Deductible share-based compensation .............................. 28,684 61,014
Unrealized loss on investments .................................. 13,620 9,879
Unrealized foreign exchange loss ................................. 8,061 45,122
Net operating loss carryforwards ................................. 36,422 40,092
Tax credit carryforwards ....................................... 37,905 25,187
Other ................................................... 24,667 22,218
Gross deferred tax assets ................................... 361,957 356,301
Valuation allowance ............................................. (52,105) (37,259)
Deferred tax assets, net of valuation allowance ........................... 309,852 319,042
Deferred tax liabilities:
Acquired intangible assets ...................................... (2,701) (3,820)
Unrealized gain on investments .................................. (5,939) (9,324)
Unrealized foreign exchange gain ................................ (3,127) (43,327)
U.S. taxes provided on unremitted earnings of foreign subsidiaries .......... (28,844) (28,844)
Total deferred tax liabilities ........................................ (40,611) (85,315)
Net deferred tax assets ........................................... $ 269,241 $ 233,727
The Company assesses its valuation allowance recorded against deferred tax assets on a regular and
periodic basis. The assessment of valuation allowance against deferred tax assets requires estimations and
significant judgment. The Company continues to assess and adjust its valuation allowance based on
operating results and market conditions. During fiscal years 2013, 2012 and 2011, based on weighing both
the positive and negative evidence available, including but not limited to, earnings history, projected future
outcomes, industry and market trends and the nature of each of the deferred tax assets, the Company
determined that it is able to realize most of its deferred tax assets with the exception of certain loss and
credit carryforwards.
The Company has federal and state net operating loss carryforwards of $86.4 million and
$136.2 million, respectively. The net operating losses will begin to expire in fiscal year 2014 if not utilized.
The Company also has California research credit carryforwards of $54.9 million. California research
credits can be carried forward to future years indefinitely. Some of these carryforwards are subject to
annual limitations, including under Section 382 and Section 383 of the U.S. Internal Revenue Code of
1986, as amended, for U.S. tax purposes and similar state provisions.
The Company provides for U.S. income taxes on the earnings of foreign subsidiaries unless the
earnings are considered indefinitely invested outside of the U.S. No provision has been made for U.S.
income taxes or foreign withholding taxes on $752.2 million of cumulative unremitted earnings of certain
foreign subsidiaries as of December 29, 2013, since the Company intends to indefinitely reinvest these
earnings outside the U.S. The Company determined that the calculation of the amount of unrecognized
deferred tax liability related to these cumulative unremitted earnings was not practicable. If these earnings
were distributed to the Company’s U.S. entity, the Company would be subject to additional U.S. income
taxes and foreign withholding taxes would be reduced by available foreign tax credits.
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Annual Report