Chesapeake Energy 2010 Annual Report Download - page 139

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
5. Income Taxes
The components of the income tax provision (benefit) for each of the periods presented below are as
follows:
Years Ended December 31,
2010 2009 2008
($ in millions)
Current ........................................................ $ — $ 4 $ 423
Deferred ....................................................... 1,110 (3,487) (36)
Total ........................................................ $ 1,110 $ (3,483) $ 387
The effective income tax expense (benefit) differed from the computed “expected” federal income tax
expense on earnings before income taxes for the following reasons:
Years Ended December 31,
2010 2009 2008
($ in millions)
Income tax expense (benefit) at the federal statutory rate (35%) .......... $ 1,009 $ (3,251) $ 347
State income taxes (net of federal income tax benefit) .................. 78 (275) 24
Other .......................................................... 23 43 16
Total ......................................................... $ 1,110 $ (3,483) $ 387
Deferred income taxes are provided to reflect temporary differences in the basis of net assets for income
tax and financial reporting purposes. The tax-effected temporary differences and tax loss carryforwards which
comprise deferred taxes are as follows:
Years Ended December 31
2010 2009
($ in millions)
Deferred tax liabilities:
Natural gas and oil properties ...................................... $ (2,074) $ (96)
Other property and equipment ...................................... (184) (184)
Derivative instruments ............................................ — (265)
Volumetric production payments .................................... (1,394) (937)
Contingent convertible debt ........................................ (493) (464)
Other .......................................................... — (8)
Deferred tax liabilities ........................................... (4,145) (1,954)
Deferred tax assets:
Net operating loss carryforwards .................................... 1,386 592
Derivative instruments ............................................ 115 —
Asset retirement obligation ......................................... 114 107
Investments ..................................................... 40 32
Deferred stock compensation ...................................... 84 57
Accrued liabilities ................................................ 25 22
Alternative minimum tax credits ..................................... 11 25
Oklahoma statutory depletion ...................................... 93 84
Other .......................................................... 32 —
Deferred tax assets ............................................. 1,900 919
Total deferred tax asset (liability) ...................................... $ (2,245)(a) $ (1,035)
Reflected in accompanying balance sheets as:
Current deferred income tax asset .................................. $ 139 $ 24
Non-current deferred income tax liability .............................. (2,384) (1,059)
Total ......................................................... $ (2,245) $ (1,035)
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