Adobe 2007 Annual Report Download - page 84

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2007 2006
Deferred tax assets:
Acquired technology............................................ $ 7,603 $ 6,715
Reserves and accruals........................................... 61,772 55,662
Deferred revenue............................................... 38,663 24,533
Unrealized losses on investments.................................. 18,756 19,072
FAS 123R stock compensation................................... 40,682 28,716
Net operating loss of acquired companies .......................... 66,677 134,440
Credits. ...................................................... 44,866 47,360
Depreciation and amortization.................................... 1,213 —
Other ........................................................ 4,763 9,216
Total gross deferred tax assets.................................. 284,995 325,714
Deferred tax asset valuation allowance........................... (2,629 ) (1,243)
Total deferred tax assets....................................... 282,366 324,471
Deferred tax liabilities:
Depreciation and amortization.................................... — (1,420)
Undistributed earnings of foreign subsidiaries. ...................... (166,62
9
) (112,084)
Acquired intangible assets....................................... (93,208 ) (126,069)
Total deferred tax liabilities. ................................... (259,837 ) (239,573)
Net deferred tax assets............................................ $ 22,529 $ 84,898
The deferred tax assets and liabilities for fiscal 2007 and fiscal 2006 include amounts related to various acquisitions.
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. As of November 30, 2007, the cumulative amount of earnings upon which U.S. income taxes have
not been provided is approximately $718.2 million. The unrecognized deferred tax liability for these earnings is
approximately $223.4 million.
As of November 30, 2007, we have net operating loss carryforward assets attributable to various acquired companies of
approximately $66.7 million. We also have federal and state tax credit carryforwards of approximately $14.0 million and
$31.0 million, respectively. The net operating loss carryforward assets and federal tax credits will expire between fiscal 2013
and 2025. The state tax credit carryforward can be carried forward indefinitely. The net operating loss carryforward assets
and certain credits are subject to an annual limitation under Internal Revenue Code Section 382, but are expected to be fully
realized.
In addition, we have been tracking certain deferred tax attributes of $48.7 million which have not been recorded in the
financial statements pursuant to SFAS 123R. These amounts are no longer included in our gross or net deferred tax assets.
Pursuant to SFAS 123R, footnote 82, the benefit of these deferred tax assets will be recorded to equity when they reduce
taxes payable.
A valuation allowance has been established for certain deferred tax assets related to the impairment of investments. At
the end of fiscal 2007, our valuation allowance was $2.6 million.
We are currently under examination by the Internal Revenue Service for our fiscal 2001, 2002 and 2003 tax returns.
Although we believe our assumptions, judgments and estimates are reasonable, changes in tax laws or our interpretation of
tax laws and the resolution of the current and any future tax audits could significantly impact the amounts provided for
income taxes in our consolidated financial statements. Although the ultimate outcome is unknown, we have reserved for
potential adjustments that may result from the current examination and we believe that the final outcome will not have a
material effect on our results of operations.