CompUSA 2007 Annual Report Download - page 95

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The deferred tax assets (liabilities) are comprised of the following (in thousands):
December 31,
2007 2006
Current:
Deductible assets $(773) $(876)
Accrued expenses and other liabilities 8,379 8,063
Inventory 2,374 1,596
Other (524) (318)
Valuation allowances (96) (738)
Total current assets, net 9,360 7,727
Non-current:
Net operating loss and credit carryforwards 12,462 15,881
Accelerated depreciation 3,494 3,520
Intangible and other assets 6,791 8,453
Other 3,196 3,328
Valuation allowances (7,291) (17,141)
Subtotal non-current assets, net 18,652 14,041
TOTAL $28,012 $21,768
The Company has not provided for federal income taxes applicable to the undistributed earnings of its foreign subsidiaries
of approximately $33.8 million as of December 31, 2007, since these earnings are indefinitely reinvested. The Company has
foreign net operating loss carryforwards which expire through 2022 except for carryforwards in the United Kingdom which
have no expiration. The Company records these benefits as assets to the extent that utilization of such assets is more likely
than not; otherwise, a valuation allowance has been recorded. The Company has also provided valuation allowances for
certain state deferred tax assets and net operating loss carryforwards where it is not likely they will be realized.
In the fourth quarter of 2005, the Company recorded a valuation allowance of $10.2 million related to carryforward losses
and deferred tax assets in the United Kingdom. The Company’s United Kingdom subsidiary had recorded losses and has
been affected by restructuring activities in recent years. These losses and the loss incurred for the year ended December 31,
2005 represented evidence for management to estimate that a full valuation allowance for the net deferred tax assets was
necessary. In the fourth quarter of 2005, the Company also recorded an income tax benefit of $2.7 million as a result of a
favorable decision received in connection with a petition submitted in connection with audit assessments made in 2002 and
2004 in a foreign jurisdiction. In the fourth quarter of 2007 the Company’s United Kingdom subsidiary emerged from its
cumulative loss position and the remaining valuation allowance against the deferred tax assets of the United Kingdom of
approximately $5.9 million was reversed. In the fourth quarter of 2007 the Company recorded a valuation allowance of
approximately $1.7 million against the deferred tax assets of its German subsidiary as the result of the German subsidiary
entering a cumulative loss position and uncertainty as to whether or not future earnings will be sufficient to enable
utilization of those assets.
As of December 31, 2007, the valuation allowances of approximately $7.4 million related to net operating loss
carryforwards in foreign jurisdictions of $6.0 million, $1.2 million for state net operating loss carryforwards and $0.2
million for other state deductible temporary differences. During the year ended December 31, 2007, valuation allowances
decreased $10.5 million primarily as a result of the reversal of the valuation allowance in the United Kingdom, utilization of
net operating losses and timing differences in the United Kingdom and utilization of state net operating loss deductions in
the United States. Valuation allowances decreased $2.3 million in 2006 for carryforward losses utilized for which valuation
allowances had been previously provided. As of December 31, 2006, the valuation allowances of $17.9 million included
$11.4 million related to net operating loss carryforwards and $3.2 million for other deductible temporary differences in
foreign jurisdictions, $3.0 million for state net operating loss carryforwards and $0.3 million for other state deductible
temporary differences. During the year ended December 31, 2006, valuation allowances increased $2.6 million as a result of
additional losses incurred in certain state jurisdictions and adjustments of prior year’s allowances in foreign jurisdictions. As
of December 31, 2005, the valuation allowances of $15.3 million included $11.1 million related to net operating loss
carryforwards and $2.3 million for other deductible temporary differences in foreign jurisdictions and $1.5 million for state
net operating loss carryforwards and $0.4 million for other state deductible temporary differences. During the year ended
December 31, 2005, valuation allowances increased $5.6 million as a result of additional losses incurred in foreign and state
jurisdictions, net of reductions resulting from changes in deferred tax assets due to changes in tax laws. Valuation
allowances decreased $1,301,000 in 2005 for carryforward losses utilized for which valuation allowances had been
previously provided.
The Company is routinely audited by federal, state and foreign tax authorities with respect to its income taxes. The
Company regularly reviews and evaluates the likelihood of audit assessments and believes it has adequately accrued for
exposures for tax liabilities resulting from future tax audits. To the extent the Company would be required to pay amounts in
excess of reserves or prevail on matters for which accruals have been established, the Company’s effective tax rate in a
given period may be materially impacted. The Company’s federal income tax returns for fiscal years 1996 through 2002