Adobe 2013 Annual Report Download - page 83

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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 November 29, 2013 and November 30, 2012 are presented below (in thousands):
2013 2012
Deferred tax assets:
Acquired technology $ 14,379 $ 3,890
Reserves and accruals 67,753 71,888
Deferred revenue 10,218 9,941
Unrealized losses on investments 9,793 17,482
Stock-based compensation 64,244 85,179
Net operating loss carryforwards of acquired companies 9,222 16,257
Credit carryforwards 43,175 31,172
Capitalized expenses 188 4,023
Other 6,788 5,165
Total gross deferred tax assets 225,760 244,997
Deferred tax asset valuation allowance (21,493)(28,247)
Total deferred tax assets 204,267 216,750
Deferred tax liabilities:
Depreciation and amortization (89,611)(81,034)
Undistributed earnings of foreign subsidiaries (211,417)(187,528)
Acquired intangible assets (176,626)(153,757)
Total deferred tax liabilities (477,654)(422,319)
Net deferred tax liabilities $ (273,387) $ (205,569)
The deferred tax assets and liabilities for fiscal 2013 and 2012 include amounts related to various acquisitions. The total
change in deferred tax assets and liabilities in fiscal 2013 includes changes that are recorded to OCI, additional paid-in capital,
goodwill and retained earnings.
We provide for 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 November 29,
2013, the cumulative amount of earnings upon which U.S. income taxes have not been provided is approximately $3.1 billion.
The unrecognized deferred tax liability for these earnings is approximately $0.8 billion.
As of November 29, 2013, we have net operating loss carryforwards of approximately $10.8 million for federal, $30.4
million for state, and $10.8 million for foreign. We also have federal, state and foreign tax credit carryforwards of approximately
$1.4 million, $30.2 million and $22.2 million, respectively. The net operating loss carryforward assets, federal tax credits and
foreign tax credits will expire in various years from fiscal 2014 through 2033. 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 track certain deferred tax attributes of $47.0 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 if and when they
reduce taxes payable.
As of November 29, 2013, a valuation allowance of $21.5 million has been established for certain deferred tax assets related
to the impairment of investments and certain foreign assets. For fiscal 2013, the total change in the valuation allowance was $6.8
million, of which $0.5 million was recorded as a tax expense through the income statement.
Table of Contents
ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)