Avnet 2014 Annual Report Download - page 62

Table of Contents AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
risk associated with underlying estimates of future taxable income, including considering the historical trend of down-
cycles in the
semiconductor and related industries; and (iii) prudent and feasible tax planning strategies.
As of the end of fiscal 2014, the Company had a partial valuation allowance against significant net operating loss carry-
forward
deferred tax assets related to a legal entity in EMEA due to, among several other factors, a history of losses in that entity. In recent fiscal years,
such entity has been experiencing improved earnings, which required the partial release of the valuation allowance to the extent the entity has
projected future taxable income. In fiscal 2014 and fiscal 2013, the Company determined a portion of the valuation allowance for such legal
entity was no longer required due to the expected continuation of improved earnings in the foreseeable future and, as a result, the Company's
effective tax rate was reduced upon the partial release of the valuation allowance, net of the U.S. tax expense. In fiscal 2014 and 2013, the
valuation allowance released associated with this EMEA legal entity was $33.6 million and $27.1 million
, respectively, net of the U.S. tax
expense associated with the release. Excluding the benefit in both fiscal years related to the release of the tax valuation allowance associated
with such EMEA legal entity, the effective tax rate for fiscal 2014 and fiscal 2013 would have been 27.0% and 23.0% , respectively.
ASC 740 requires a preponderance of positive evidence in order to reach a conclusion to release all or a portion of a valuation
allowance when negative evidence exists. The Company will continue to evaluate the need for a valuation allowance against these deferred tax
assets and will adjust the valuation allowance as deemed appropriate which, if reduced, could result in a significant decrease to the effective tax
rate in the period of the adjustment.
No provision for U.S. income taxes has been made for approximately $2.77 billion
of cumulative unremitted earnings of foreign
subsidiaries at June 28, 2014
because those earnings are expected to be permanently reinvested outside the U.S. A hypothetical calculation of the
deferred tax liability, assuming those earnings were remitted, is not practicable.
The significant components of deferred tax assets and liabilities, included primarily in “other assets”
on the consolidated balance sheets,
are as follows:
The change in valuation allowances from fiscal 2013 to fiscal 2014 was primarily due to (i) a net reduction of $52.7 million
primarily due
to the above mentioned release of a valuation allowance in EMEA, $33.4 million
of which impacted the effective tax rate while the remainder
was offset in deferred income taxes, and (ii) a net expense of $4.1 million
primarily related to rate changes on valuation allowances previously
established in various foreign jurisdictions.
As of June 28, 2014 , the Company had foreign net operating loss carry-forwards of approximately $1.25 billion , of which
$6.2 million
will expire during fiscal 2015 and 2016, substantially all of which have full valuation allowances, $278.4 million
have expiration dates ranging
from fiscal 2017 to 2034 and the remaining $961.3 million have no expiration date. The carrying value of the Company’
s foreign net operating
loss carry-forwards is dependent upon the Company’
s ability to generate sufficient future taxable income in certain foreign tax jurisdictions. In
addition, the Company considers historic levels of income or losses, expectations and risk associated with estimates of future taxable income and
ongoing prudent and feasible tax planning strategies in assessing a tax valuation allowance.
59
June 28,
2014
June 29,
2013
(Thousands)
Deferred tax assets:
Federal, state and foreign tax loss carry-forwards
$
336,334
$
333,940
Inventories valuation
$
18,442
$
19,509
Receivables valuation
26,022
27,185
Various accrued liabilities and other
(1,673
)
33,031
379,125
413,665
Less — valuation allowance
(182,123
)
(230,821
)
197,002
182,844
Deferred tax liabilities:
Depreciation and amortization of property, plant and equipment
(46,294
)
(50,469
)
Net deferred tax assets
$
150,708
$
132,375