Adobe 2012 Annual Report Download - page 101

101
Total income tax expense differs from the expected tax expense (computed by multiplying the U.S. federal statutory rate
of 35% by income before income taxes) as a result of the following (in thousands):
2012 2011 2010
Computed “expected” tax expense........................................................................... $ 391,578 $ 362,331 $ 330,103
State tax expense, net of federal benefit................................................................... 11,320 8,436 13,444
Tax credits................................................................................................................. (1,226)(30,283)(1,317)
Differences between statutory rate and foreign effective tax rate............................ (122,999)(135,178)(129,063)
Change in deferred tax asset valuation allowance.................................................... (2,144)(493) 1,408
Stock-based compensation (net of tax deduction).................................................... 10,976 3,983 4,181
Resolution of income tax examinations.................................................................... (26,687) — (39,753)
Domestic manufacturing deduction benefit.............................................................. (17,010)(14,350)(14,630)
U.S. tax benefits related to state income tax ruling.................................................. — (22,320) —
Tax charge for licensing acquired company technology to foreign subsidiaries...... 38,849 31,298 —
Other, net .................................................................................................................. 3,362 (1,041) 4,098
Provision for income taxes..................................................................................... $ 286,019 $ 202,383 $ 168,471
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 November 30, 2012 and December 2, 2011 are presented below (in thousands):
2012 2011
Deferred tax assets:
Acquired technology ...................................................................................................................... $ 3,890 $ 794
Reserves and accruals..................................................................................................................... 71,888 95,077
Deferred revenue............................................................................................................................ 9,941 11,999
Unrealized losses on investments................................................................................................... 17,482 16,483
Stock-based compensation............................................................................................................. 85,179 92,817
Net operating loss of acquired companies...................................................................................... 16,257 13,481
Credit carryforwards ...................................................................................................................... 31,172 24,771
Capitalized expenses ...................................................................................................................... 4,023 —
Other............................................................................................................................................... 5,165 6,298
Total gross deferred tax assets................................................................................................... 244,997 261,720
Deferred tax asset valuation allowance.......................................................................................... (28,247)(5,198)
Total deferred tax assets............................................................................................................ 216,750 256,522
Deferred tax liabilities:
Depreciation and amortization ....................................................................................................... (81,034)(74,048)
Undistributed earnings of foreign subsidiaries............................................................................... (187,528)(125,173)
Acquired intangible assets.............................................................................................................. (153,757)(146,940)
Total deferred tax liabilities....................................................................................................... (422,319)(346,161)
Net deferred tax liabilities ................................................................................................................ $ (205,569) $ (89,639)
The deferred tax assets and liabilities for fiscal 2012 and fiscal 2011 include amounts related to various acquisitions. The
total change in deferred tax assets and liabilities in fiscal 2012 includes changes that are recorded to OCI, additional paid-in capital,
goodwill and retained earnings.
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
Table of Contents
ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)