Sears 2008 Annual Report Download - page 81

SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
millions
January 31,
2009
February 2,
2008
Deferred tax assets and liabilities
Deferred tax assets:
Federal benefit for state and foreign taxes ................................. $ 143 $ 156
Accruals and other liabilities ........................................... 309 357
Capital leases ....................................................... 169 182
NOL carryforwards ................................................... 280 274
OPEB ............................................................. 169 229
Pension/Minimum pension ............................................. 582 283
Deferred revenue ..................................................... 191 204
Credit carryforwards .................................................. 108 66
Other .............................................................. 185 243
Total deferred tax assets ................................................... 2,136 1,994
Valuation allowance ...................................................... (117) (120)
Net deferred tax assets ................................................ 2,019 1,874
Deferred tax liabilities:
Trade names/Intangibles ............................................... 1,203 1,245
Property and equipment ............................................... 206 214
Inventory ........................................................... 246 326
Other .............................................................. 178 281
Total deferred tax liabilities ................................................ 1,833 2,066
Net deferred tax asset (liability) ............................................. $ 186 $ (192)
The Deferred Tax Asset and Liability table above for fiscal 2008 reflects the deferred tax assets and
liabilities net of the federal benefit of state due to the implementation of a new tax provision software system in
fiscal 2008. We reclassified fiscal 2007 deferred tax assets and liabilities above to reflect the net deferred tax
consequences of each line item.
We account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes,” which
requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary
differences between the financial reporting and tax bases of recorded assets and liabilities. SFAS No. 109 also
requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some
portion of or all of the deferred tax asset will not be realized.
During fiscal 2008, we reduced our reserves for Predecessor Company income tax liabilities by $1 million,
primarily due to favorable claims settlements. In fiscal years 2008 and 2007, we also received a tax benefit of
$23 million and $32 million, respectively, relating to certain Class 5 and 6 pre-petition claims paid with equity.
In accordance with SOP 90-7, subsequent to emergence from Chapter 11, any benefit realized from an
adjustment to pre-confirmation income tax liabilities is recorded as an addition to Capital in excess of par value.
At January 31, 2009, we had Federal net operating loss (“NOL”) carryforwards from the Predecessor
Company of approximately $269 million subject to an overall annual section 382 limitation of $96 million,
generating deferred tax assets of approximately $94 million. The federal NOL carryforwards will expire in 2021,
2022, 2023, and 2028. We also have credit carryforwards of $108 million, which will expire between 2015 and
2028.
81