Adobe 2003 Annual Report Download - page 82

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The tax effects of the temporary differences that give rise to significant portions of the deferred tax
assets and liabilities as of fiscal 2002 and 2001 are presented below:
November 28,
2003
November 29,
2002
Deferred tax assets:
Acquired technology................................................................... $ 14,711 $ 13,845
Reserves and deferred revenue ................................................... 39,568 25,621
Unrealized losses on investments ............................................... 13,574 26,159
Credits ........................................................................................ 8,230 1,500
Total gross deferred tax assets................................................ 76,083 67,125
Deferred tax asset valuation allowance................................... (13,574) ―
Total deferred tax assets ......................................................... 62,509 67,125
Deferred tax liabilities:
Depreciation and amortization.................................................... (9,422) (8,264)
Undistributed earnings of foreign subsidiaries ........................... (30,562) ―
Other........................................................................................... (4,365) (2,881)
Total deferred tax liabilities.................................................. (44,349) (11,145)
Net deferred tax assets..................................................................... $ 18,160 $ 55,980
We provide United States income taxes on the earnings of foreign subsidiaries unless the subsidiaries’
earnings are considered permanently reinvested outside the United States. To the extent that the foreign
earnings previously treated as permanently reinvested are repatriated, the related United States tax liability
may be reduced by any foreign income taxes paid on these earnings. At November 28, 2003, the
cumulative amount of earnings upon which U.S. income taxes have not been provided is approximately
$229 million. The unrecognized deferred tax liability for these earnings is approximately $71 million.
For financial reporting purposes, a valuation allowance has been established in the amount of $13.6
million for certain deferred tax assets related to the write-down of investments. Management believes that it
is more likely than not that the results of future operations will generate sufficient taxable income to realize
the remaining net deferred tax assets.
At the end of fiscal 2003, the Company had state tax credit carry-forwards of approximately $8.2
million that can be carried forward indefinitely.
Below is a summary roll-forward schedule of the income tax payable accounts as of November 28,
2003 and November 29, 2002:
November 28,
2003
November 29,
2002
Beginning balance ...................................................................... $ 173,311 $ 132,228
Add: Current year liability.......................................................... 45,655 76,946
Less: Payments and reclasses ..................................................... (25,482) (35,863)
Ending balance ........................................................................... $ 193,484 173,311
Note 10. Benefit Plans
Pretax Savings Plan
In 1987, we adopted an Employee Investment Plan, qualified under Section 401(k) of the Internal
Revenue Code, which is a pretax savings plan covering substantially all of our United States employees.
Under the plan, eligible employees may contribute up to 18% of their pretax salary, subject to the Internal
Revenue Service annual contribution limits. In fiscal 2003, we matched 50% of the first 6% of the
employee’s contribution. We contributed approximately $6.1 million, $6.0 million and $5.8 million in
fiscal 2003, 2002 and 2001, respectively. We can terminate matching contributions at our discretion.