Banana Republic 2006 Annual Report Download - page 65

foreign subsidiaries as we intend to utilize those earnings in the foreign operations for an indefinite period of
time or repatriate such earnings only when tax-effective to do so. That portion of accumulated undistributed
earnings of foreign subsidiaries at fiscal year-end 2006 and 2005 was approximately $790 million and $700
million, respectively. If the undistributed earnings were repatriated, the unrecorded deferred tax liability in fiscal
2006 and 2005 would be approximately $104 million and $80 million, respectively.
The difference between the effective income tax rate and the U.S. federal income tax rate is summarized as
follows:
53 Weeks Ended
February 3, 2007
52 Weeks Ended
January 28, 2006
52 Weeks Ended
January 29, 2005
Federal tax rate ..................................... 35.0% 35.0% 35.0%
State income taxes, less federal benefit .................. 3.1 3.5 2.7
Tax impact of foreign operations ....................... 2.3 2.3 2.0
Other ............................................. (2.0) (2.9) (1.1)
Effective Tax Rate ................................... 38.4% 37.9% 38.6%
Deferred tax assets (liabilities) consisted of the following:
($ in millions)
February 3,
2007
January 28,
2006
Deferred tax assets
Compensation and benefits accruals ...................................... $ 48 $ 44
Scheduled rent ....................................................... 116 117
Nondeductible accruals ................................................ 81 77
Fair value of financial instruments included in accumulated other comprehensive
earnings .......................................................... — 1
Depreciation ........................................................ 17 —
Inventory capitalization and other adjustments ............................. 26 —
Other .............................................................. 57 62
State and foreign net operating losses (“NOL’s”) ........................... 48 67
Total deferred tax assets ................................................... 393 368
NOL valuation allowance .................................................. (14) (18)
Deferred tax liabilities
Fair value of financial instruments included in accumulated other comprehensive
earnings .......................................................... (10) —
Depreciation ........................................................ — (17)
Other .............................................................. (26) (17)
Inventory capitalization and other adjustments ............................. — (3)
Total deferred tax liabilities ............................................ (36) (37)
Net deferred tax assets .................................................... $343 $313
Current portion (included in other current assets) ............................... $156 $109
Non-current portion (included in other assets) .................................. 187 204
Total .................................................................. $343 $313
At February 3, 2007, we had $448 million of state and foreign net operating loss carryovers that could be
utilized to reduce the tax liabilities of future years. A portion of the state and foreign net operating loss
carryovers was reduced by a valuation allowance. The losses began to expire in fiscal 2007 with some loss
carryovers having indefinite carryforward periods.
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