Zynga 2012 Annual Report Download - page 97

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We have not provided U.S. income taxes and foreign withholding taxes on the undistributed earnings of our
profitable foreign subsidiaries as of December 31, 2012 because we intend to permanently reinvest such earnings
outside the United States. If these foreign earnings were to be repatriated in the future, the related U.S. tax
liability may be reduced by any foreign income taxes previously paid on these earnings. As of December 31,
2012, the cumulative amount of earnings upon which U.S. income taxes have not been provided is approximately
$4.4 million.
Deferred tax assets and liabilities consist of the following (in thousands):
Year Ended December 31,
2012 2011
Deferred tax assets:
Equity based compensation ................... $68,644 $ 106,333
Tax credit carryforwards ..................... 27,502 25,811
Deferred revenue ........................... 16,200 14,355
Net operating loss carryforwards ............... 12,810 17,502
Deferred rent ............................... 6,014 11,804
Charitable contributions ...................... 4,836 1,448
Other accrued compensation .................. 5,031 6,089
Accrued expenses ........................... 2,764 5,532
State taxes ................................. 2,765 1,858
Other ..................................... 1,926 615
Valuation allowance ......................... (90,382) (113,352)
Net deferred tax assets ........................... 58,110 77,995
Deferred tax liabilities:
Depreciation ............................... (52,252) (62,957)
Acquired intangible assets .................... — (4,495)
Prepaid expenses ............................ (320) (828)
Net deferred tax liabilities .................... (52,572) (68,280)
Net deferred taxes ........................... $ 5,538 $ 9,715
Year Ended December 31,
2012 2011
Recorded as:
Current deferred tax assets ..................... $30,122 $ 23,515
Other current assets .......................... — 150
Other current liabilities ........................ — —
Non-current deferred tax liabilities .............. (24,584) (13,950)
Net deferred tax assets ............................ $ 5,538 $ 9,715
In determining the need for a valuation allowance, the Company weighs both positive and negative evidence
in the various taxing jurisdictions in which it operates to determine whether it is more likely than not that its
deferred tax assets are recoverable. In assessing the ultimate realizability of its net deferred tax assets, the
Company considers its past performance, available tax strategies, and expected future taxable income. At
December 31, 2012 and December 31, 2011, the Company recorded a valuation allowance of $90.4 million and
$113.3 million, respectively, against its net deferred tax assets, as it believes it is more likely than not that these
benefits will be not be realized.
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