Time Magazine 2011 Annual Report Download - page 102

TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The differences between income taxes expected at the U.S. federal statutory income tax rate of 35% and
income taxes provided are as set forth below (millions):
Year Ended December 31,
2011 2010 2009
Taxes on income at U.S. federal statutory rate ................... $ 1,528 $ 1,372 $ 1,133
State and local taxes, net of federal tax effects .................. 71 73 78
Domestic production activities deduction ...................... (123) (96) (69)
Other ................................................... 8 (1) 11
Total ................................................... $ 1,484 $ 1,348 $ 1,153
Significant components of Time Warner’s net deferred tax liabilities are as follows (millions):
December 31,
2011 2010
Deferred tax assets:
Tax attribute carryforwards(a) ......................................... $ 889 $ 758
Receivable allowances and return reserves .............................. 274 270
Royalties, participations and residuals .................................. 438 419
Investments ....................................................... 188 179
Equity-based compensation .......................................... 443 891
Amortization and depreciation ........................................ 130 410
Other ............................................................ 1,131 986
Valuation allowances(a) .............................................. (640) (594)
Total deferred tax assets ............................................. $ 2,853 $ 3,319
Deferred tax liabilities:
Assets acquired in business combinations ............................... $ 3,641 $ 3,754
Unbilled television receivables ........................................ 939 780
Unremitted earnings of foreign subsidiaries .............................. 151 154
Total deferred tax liabilities .......................................... 4,731 4,688
Net deferred tax liability ............................................. $ 1,878 $ 1,369
(a) The Company has recorded valuation allowances for certain tax attribute carryforwards and other deferred tax assets due to uncertainty
that exists regarding future realizability. The tax attribute carryforwards consist of $340 million of tax credits, $216 million of capital
losses and $333 million of net operating losses that expire in varying amounts from 2012 through 2031. If in the future the Company
believes that it is more likely than not that these deferred tax benefits will be realized, the majority of the valuation allowances will be
recognized in the Consolidated Statement of Operations.
U.S. income and foreign withholding taxes have not been recorded on permanently reinvested earnings of
certain foreign subsidiaries aggregating approximately $1.9 billion at December 31, 2011. Determination of the
amount of unrecognized deferred U.S. income tax liability with respect to such earnings is not practicable.
For accounting purposes, the Company records equity-based compensation expense and a related deferred
tax asset for the future tax deductions it may receive. For income tax purposes, the Company receives a tax
deduction equal to the stock price on the date that a restricted stock unit (or performance share unit) vests or the
excess of the stock price over the exercise price of an option upon exercise. The deferred tax asset is comprised
of amounts relating to individual unvested and/or unexercised equity-based compensation award; accordingly,
deferred tax assets related to certain equity awards may currently be in excess of the tax benefit ultimately
received. The applicable accounting rules require that the deferred tax asset related to an equity-based
compensation award be reduced only at the time the award vests (in the case of a restricted stock unit or
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