Chegg 2015 Annual Report Download - page 127

Table of Contents
88
Year Ended December 31,
2015 2014
Deferred tax assets:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,351 $ 6,291
Share-based compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,676 18,391
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,488 4,589
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,664 36,847
Property and equipment, textbooks and intangibles assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,577 10,754
Other items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,612 2,277
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,368 79,149
Valuation allowance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (98,209)(79,093)
Total deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 56
Deferred tax liabilities: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 862 321
Total deferred tax liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 862 321
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(703) $ (265)
At December 31, 2015 and 2014 the deferred tax liability is created by the tax amortization of acquired indefinite lived
intangible assets. Under the accounting guidance this deferred tax liability cannot be used as a source of income for recognition
of deferred tax assets when determining the amount of valuation allowance to be recorded.
Realization of the deferred tax assets is dependent upon future taxable income, the amount and timing of which are
uncertain. Accordingly, the federal and state gross deferred tax assets have been fully offset by a valuation allowance. The net
valuation allowance increased by approximately $19.1 million and $20.7 million during 2015 and 2014, respectively.
As of December 31, 2015, we had net operating loss carryforwards for federal and state income tax purposes of
approximately $159.0 million and $120.0 million, respectively, which will begin to expire in years beginning 2028 and 2016,
respectively. As of December 31, 2014, we have net operating loss carryforwards for federal and state income tax purposes of
approximately $96.9 million and $56.5 million, respectively.
As of December 31, 2015, we had tax credit carryforwards for federal and state income tax purposes of
approximately $3.7 million and $4.0 million, respectively. The federal credits expire in various years beginning in 2030. The
state credits do not expire. As of December 31, 2014, we had tax credit carryforwards for federal and state income tax purposes
of approximately $2.5 million and $2.7 million, respectively
Utilization of our net operating losses and tax credit carryforwards may be subject to substantial annual limitations due
to ownership change limitations provided by the Internal Revenue Code of 1986, as amended (IRC), and similar state
provisions. Such annual limitations could result in the expiration of the net operating losses and tax credit carryforwards before
utilization.
As of December 31, 2015 and 2014, we have permanently reinvested approximately $4.4 million and $3.4 million of
earnings from our international subsidiaries, respectively, and have not provided for U.S. federal income and foreign
withholding taxes. If we were to distribute these earnings, such earnings could be subject to income or other taxes upon
repatriation. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.
During the year ended December 31, 2015, we settled an audit relating to an examination by the tax authorities in
India for the fiscal filing period 2010/11 for which we had received a notice of proposed adjustment relating to our transfer
pricing between the US and our Indian subsidiary. Additionally, during the year ended December 31, 2015 we were informed
that we would be under examination by the tax authorities in India for the fiscal filing period 2011/12 relating to our transfer
pricing between the United States and our Indian subsidiary. This settlement may or may not result in changes to our
contingencies related to position on tax filings in years through 2015. We have accrued for any additional taxes that may be