AMD 2006 Annual Report Download - page 74

Table of Contents
current foreign taxes, plus deferred U.S. taxes related to indefinite-lived goodwill, and reduced by deferred foreign benefits from removing part of the valuation
allowance on German net operating loss carryovers of Fab 36. The income tax benefit in 2005 primarily reflects U.S. tax benefits realized from the utilization of
net operating losses and tax credits and foreign tax benefits generated by Spansion in certain foreign jurisdictions. Spansion’s IPO did not have a material impact
on our tax provision. The income tax provision in 2004 primarily reflects U.S. income taxes, including taxes on the dividends repatriated from controlled foreign
corporations, partially offset by foreign tax benefits because of losses in various foreign jurisdictions.
As of December 31, 2006, we had U.S. federal and state net operating loss carry-forwards of approximately $38 million and $99 million. We 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 our 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.
We 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.
We had Canadian federal and provincial tax operating loss carry-forwards of approximately $31 million. These losses expire in 2026. We also had
Canadian investment tax credits of approximately $139 million. $72 million of these investment tax credits expires in 2012 and 2013 with the remainder expiring
by 2026. We also had Canadian federal and provincial research and development pools of $523 million and $275 million, respectively, which are not subject to
expiration.
We had net operating losses of $154 million in Barbados which expire beginning in 2012 through 2015.
We also had foreign loss carry-forwards totaling approximately $34 million in other countries with various expiration dates.
We maintain a full valuation allowance against all our net U.S. federal, state and Canadian deferred tax assets and certain of our other foreign deferred tax
assets ($1.046 billion at December 31, 2006) because of our prior history of losses.
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.
as a result of our purchase accounting related to the ATI acquisition. If we in the future determine that it is more likely than not that some or all of the net
deferred tax assets will be realized, an appropriate amount of the previously provided valuation allowance will be reversed, resulting in a benefit to our operating
results or a reduction of goodwill if the valuation allowance is related to acquired deferred tax assets. Such benefits would be recorded on the income tax
(benefit) provision line of our statement of operations in the quarter such determination is made.
We have placed a full valuation allowance on our Canadian net deferred tax assets acquired from the acquisition of ATI. These new Canadian operations
are subject to immediate taxation in the U.S. as a branch. Future profits will be taxed at U.S. corporate tax rates net of any Canadian income taxes allowable as
U.S. foreign income tax credits.
We have a deferred tax liability associated with a portion of the indefinite-lived goodwill resulting from the acquisition of ATI, as this portion of the
purchase price is tax deductible. Because we also have a full valuation allowance against our net deferred tax assets without this item, future increases to this
deferred tax liability will increase our provision for income taxes independent of the changes in deferred tax assets, liabilities, and
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007