VMware 2013 Annual Report Download - page 83

Table of Contents VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Deferred tax assets and liabilities are recognized for future tax consequences of differences between the carrying amounts of assets and liabilities and
their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to be reversed. Significant deferred tax assets and
liabilities consist of the following (table in millions):
VMware has U.S. federal net operating loss carryforwards of $129 million from acquisitions made since 2007 . These operating loss carryforwards
expire at different periods through 2031 . Portions of these carryforwards are subject to annual limitations. VMware expects to be able to fully use these net
operating losses against future income. Also resulting from acquisitions since 2006 , VMware has state net operating loss carryforwards of $223 million
expiring at different periods through 2032 .
A valuation allowance was recorded to reduce gross deferred tax assets to an amount VMware believes is more likely than not to be realized. VMware
determined that the realization of deferred tax assets relating to certain state research and development credits and capital losses did not meet the more likely
than not threshold, and accordingly, a valuation allowance was assessed.
VMware has non-U.S. credits of $2 million . U.S. income taxes have not been provided on certain undistributed earnings of non-U.S. subsidiaries of
approximately $2,830 million and $2,002 million at December 31, 2013 and 2012 , respectively, because such earnings are considered to be reinvested
indefinitely outside of the U.S., or will be remitted substantially free of additional tax. VMware's rate of taxation in foreign jurisdictions is lower than the
U.S. tax rate. VMware's international income is primarily earned by VMware's subsidiaries in Ireland, where the statutory tax rate is 12.5% . Recent
developments in non-U.S. tax jurisdictions and unfavorable changes in non-U.S. tax laws and regulations could have an adverse effect on VMware’
s effective
tax rate if earnings are lower than anticipated in countries where the statutory tax rates are lower than the U.S. federal tax rate. All income earned abroad,
except for previously taxed income for U.S. tax purposes, is considered indefinitely reinvested in VMware's foreign operations and no provision for U.S.
taxes has been provided with respect to such income.
Although VMware files a consolidated federal tax return with EMC, the income tax provision is calculated primarily as though VMware were a separate
taxpayer. However, certain transactions that VMware and EMC are parties to, are assessed using consolidated tax return rules.
80
December 31,
2013
2012
Deferred tax assets:
Unearned revenue
$
224
$
211
Accruals and other
45
43
Stock-based compensation
68
65
Tax credit and net operating loss carryforwards
119
130
Other non-current assets
14
—
Basis difference in investment in business
20
—
Net deferred tax assets
490
449
Valuation allowance
(94
)
(64
)
Total deferred tax assets
396
385
Deferred tax liabilities:
Property, plant and equipment, net
(70
)
(51
)
Intangibles and other assets, net
(76
)
(55
)
Total deferred tax liabilities
(146
)
(106
)
Total deferred tax assets, net
$
250
$
279