eBay 2003 Annual Report Download - page 125

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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (CONTINUED)
The following is a reconciliation of the diÅerence between the actual provision for income taxes and
the provision computed by applying the federal statutory rate of 35% for 2001, 2002, and 2003 to income
before income taxes (in thousands):
Year Ended December 31,
2001 2002 2003
Provision at statutory rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $59,660 $138,543 $228,873
Permanent diÅerences:
Foreign income taxed at diÅerent rates ÏÏÏÏÏÏÏÏÏÏ (4,212) (5,406) (45,190)
Acquisition related expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,834 Ì Ì
Change in valuation allowance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 5,756
Subsidiary loss not beneÑted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,807 1,052 Ì
Tax-exempt interest incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,737) (2,378) (1,272)
State taxes, net of federal beneÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,468 15,722 23,297
Tax credits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (2,021) (7,943)
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 189 434 3,217
$80,009 $145,946 $206,738
Deferred tax assets and liabilities are recognized for the future tax consequences of diÅerences
between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates
in eÅect for the year in which the diÅerences are expected to reverse. SigniÑcant deferred tax assets and
liabilities consist of the following (in thousands):
December 31,
2002 2003
Deferred tax assets:
Net operating loss and credits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 207,276 $ 186,142
Accruals and allowances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40,941 38,344
Depreciation and amortization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5,708) (16,164)
Net unrealized lossesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,921 9,469
Net deferred tax assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 245,430 217,791
Valuation allowanceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (145,182) (165,831)
100,248 51,960
Deferred tax liabilities:
Acquisition-related intangibles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (111,843) (107,064)
$ (11,595) $ (55,104)
As of December 31, 2003, our federal and state net operating loss carryforwards for income tax
purposes were approximately $502.6 million and $238.8 million, respectively. If not utilized, the federal net
operating loss carryforwards will begin to expire in 2019, and the state net operating loss carryforwards will
begin to expire in 2006. The Company's federal and state research tax credit carryforwards for income tax
purposes are approximately $20.2 million and $17.4 million, respectively. If not utilized, the federal tax
credit carryforwards will begin to expire in 2021. Deferred tax assets of approximately $151.6 million at
December 31, 2003 pertain primarily to certain net operating loss carryforwards resulting from the exercise
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