AMD 2006 Annual Report Download - page 121

Table of Contents
As of December 31, 2006 and December 25, 2005, non-current deferred tax assets of approximately $2 million and $7 million, respectively, were included
in the caption, “Other Assets” on the Company’s consolidated balance sheets. The change in net deferred taxes will not equal the deferred portion of the 2006
provision as a result of initial tax liabilities from the ATI acquisition in 2006.
As of December 31, 2006, all of the Company’s U.S. deferred tax assets, net of deferred tax liabilities other than the deferred tax liability related to tax
deductible goodwill, are subject to a full valuation allowance, which was initially established in the fourth quarter of 2002. The realization of these assets is
dependent on substantial future taxable income which, at December 31, 2006, in management’s estimate, is not more likely than not to be achieved. In 2006, the
net valuation allowance increased by $305 million, primarily, to provide valuation allowance for tax assets in Canada and for losses in the U.S. In 2005, the net
valuation allowance increased by $48 million primarily as a result of continuing to provide valuation allowance for start-up losses at the Company’s new
manufacturing operation in Germany. In 2004, the net valuation allowance decreased by $37 million primarily due to the utilization of net operating loss
carry-forwards.
In addition, net deferred tax assets of approximately $255 million pertained to certain deductible temporary differences and net operating loss
carryforwards acquired in the ATI acquisition. When recognized, the reversal of the valuation allowance on these deferred tax assets will be accounted for as a
credit to existing goodwill or other long-term intangibles of ATI rather than as a reduction of the period’s income tax provision. If no goodwill or long-term
intangible assets remain, the credit would reduce the income tax provision in the period of the valuation allowance reversal.
Approximately $227 million of federal tax credits have been derecognized as of December 31, 2006. The derecognition of these credits results from excess
stock option deduction benefits in connection with our adoption of SFAS 123R. The Company will use the with-and-without method to determine when these
benefits are realized. Accordingly the Company will increase capital in excess of par value and reduce income taxes payable when realization occurs. There were
approximately $118 million of stock option deductions in the valuation allowance for deferred taxes as of December 25, 2005.
As of December 31, 2006, the Company had U.S. federal and state net operating loss carry-forwards of approximately $38 million and $99 million. The
Company also had U.S. federal and state tax credit carry-forwards of approximately $310 million and $112 million. The U.S. net operating loss and tax credit
carry-forwards subject to expiration will expire at various dates beginning in 2007 through 2026, if not utilized. Approximately $28 million of the Company’s
U.S. federal net operating loss carry-forwards are subject to annual limitations as a result of the ATI acquisition and prior purchase transactions. Less than $6
million of U.S. federal tax credit carry-forwards will expire unused by the end of 2009 should U.S. federal income tax liabilities not be large enough to utilize
them in these future years.
The Company had German federal income and state trade tax operating loss carry-forwards of approximately $469 million and $414 million. German
federal income and trade tax net operating losses are not subject to expiration. However, German losses are limited to 60 percent of taxable income in any one
year.
The Company had Canadian federal and provincial tax operating loss carry-forwards of approximately $31 million. These losses expire in 2026. The
Company also had Canadian investment tax credits of approximately $139 million. $72 million of these investment tax credits expire in 2012 and 2013 with the
remainder expiring by 2026. The Company also had Canadian federal and provincial research and development pools of $523 million and $275 million, which
are not subject to expiration.
The Company had net operating losses of $154 million in Barbados which expire beginning in 2012 through 2015.
The Company also had foreign loss carry-forwards totaling approximately $34 million in other countries with various expiration dates.
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007