Adobe 2011 Annual Report Download - page 100

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Deferred Tax Assets and Liabilities
The tax effects of the temporary differences that gave rise to significant portions of the deferred tax assets and liabilities
as of December 2, 2011 and December 3, 2010 are presented below (in thousands):
Deferred tax assets:
Acquired technology
Reserves and accruals
Deferred revenue
Unrealized losses on investments
Stock-based compensation
Net operating loss of acquired companies
Credit carryforwards
Capitalized expenses
Other
Total gross deferred tax assets
Deferred tax asset valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Depreciation and amortization
Undistributed earnings of foreign subsidiaries
Acquired intangible assets
Total deferred tax liabilities
Net deferred tax (liabilities) assets
2011
$ 794
95,077
11,999
16,483
92,817
13,481
24,771
—
6,298
261,720
(5,198)
256,522
(74,048)
(125,173)
(146,940)
(346,161)
$(89,639)
2010
$ 3,774
72,395
17,114
6,263
73,985
24,284
8,629
9,188
12,889
228,521
(5,691)
222,830
(38,524)
(55,841)
(148,316)
(242,681)
$(19,851)
The deferred tax assets and liabilities for fiscal 2011 and fiscal 2010 include amounts related to various acquisitions. The
total change in deferred tax assets and liabilities in fiscal 2011 includes changes that are recorded to OCI, additional paid-in capital,
goodwill and retained earnings.
During fiscal 2010, we repatriated $700 million of undistributed foreign earnings for which a deferred tax liability had been
previously recognized. As such, a long-term deferred tax liability of approximately $200 million was reclassified from deferred
income taxes to income taxes payable in the first quarter of fiscal 2010 and was paid during fiscal 2010.
We provide U.S. income taxes on the earnings of foreign subsidiaries unless the subsidiaries’ earnings are considered
permanently reinvested outside the U.S. To the extent that the foreign earnings previously treated as permanently reinvested are
repatriated, the related U.S. tax liability may be reduced by any foreign income taxes paid on these earnings. As of December 2,
2011, the cumulative amount of earnings upon which U.S. income taxes have not been provided is approximately $2.4 billion.
The unrecognized deferred tax liability for these earnings is approximately $0.7 billion.
As of December 2, 2011, we have U.S. net operating loss carryforwards of approximately $32.4 million for federal and
$37.5 million for state. We also have federal and state tax credit carryforwards of approximately $9.4 million and $23.7 million,
respectively. The net operating loss carryforward assets, federal tax credits and foreign tax credits will expire in various years
from fiscal 2017 through 2031. The state tax credit carryforwards 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 $44.6 million which have not been recorded in the
financial statements pursuant to accounting standards related to stock-based compensation. These amounts are no longer included
in our gross or net deferred tax assets. Pursuant to these standards, the benefit of these deferred tax assets will be recorded to equity
when they reduce taxes payable.
Table of Contents
ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)