Adobe 2014 Annual Report Download - page 86

ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
86
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 28, 2014 and November 29, 2013 are presented below (in thousands):
2014 2013
Deferred tax assets:
Acquired technology ...................................................................................................................... $ 9,477 $ 14,379
Reserves and accruals..................................................................................................................... 56,109 67,753
Deferred revenue............................................................................................................................ 16,311 10,218
Unrealized losses on investments................................................................................................... 6,723 9,793
Stock-based compensation............................................................................................................. 58,501 64,244
Net operating loss carryforwards of acquired companies.............................................................. 9,082 9,222
Credit carryforwards ...................................................................................................................... 41,419 43,175
Capitalized expenses ...................................................................................................................... — 188
Other............................................................................................................................................... 10,974 6,788
Total gross deferred tax assets................................................................................................... 208,596 225,760
Deferred tax asset valuation allowance.......................................................................................... (22,100)(21,493)
Total deferred tax assets............................................................................................................ 186,496 204,267
Deferred tax liabilities:
Depreciation and amortization ....................................................................................................... 73,295 89,611
Undistributed earnings of foreign subsidiaries............................................................................... 221,845 211,417
Acquired intangible assets.............................................................................................................. 138,392 176,626
Total deferred tax liabilities....................................................................................................... 433,532 477,654
Net deferred tax liabilities ................................................................................................................ $ 247,036 $ 273,387
The deferred tax assets and liabilities for fiscal 2014 and 2013 include amounts related to various acquisitions. The total
change in deferred tax assets and liabilities includes changes that are recorded to OCI, additional paid-in capital, goodwill,
unrecognized tax benefits 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
repatriated, the related U.S. tax liability may be reduced by any foreign income taxes paid on these earnings. As of November 28,
2014, the cumulative amount of earnings upon which U.S. income taxes have not been provided is approximately $3.3 billion.
The unrecognized deferred tax liability for these earnings is approximately $0.9 billion.
As of November 28, 2014, we have net operating loss carryforwards of approximately $22.6 million for federal and $3.4
million for foreign. We also have federal, state and foreign tax credit carryforwards of approximately $1.6 million, $26.7 million
and $22.4 million, respectively. The net operating loss carryforward assets, federal tax credits and foreign tax credits will expire
in various years from fiscal 2015 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 have been tracking certain deferred tax attributes of $49.2 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 28, 2014, a valuation allowance of $22.1 million has been established for certain deferred tax assets related
to the impairment of investments and certain state and foreign assets. For fiscal 2014, the total change in the valuation allowance
was $0.6 million.