Computer Associates 2012 Annual Report Download - page 96

Deferred income taxes reflect the effect of temporary differences between the carrying amounts of assets and liabilities recognized for
financial reporting purposes and the amounts recognized for tax purposes. The tax effects of the temporary differences from
continuing operations are as follows:
AT MARCH 31,
(in millions) 2012 2011
Deferred tax assets:
Modified accrual basis accounting for revenue $ 447 $ 441
Share-based compensation 48 50
Accrued expenses 30 53
Net operating losses 173 178
Intangible assets amortizable for tax purposes 11 16
Deductible state tax and interest benefits 56 43
Other 53 52
Total deferred tax assets 818 833
Valuation allowances (68) (85)
Total deferred tax assets, net of valuation allowances 750 748
Deferred tax liabilities:
Purchased software 133 73
Depreciation 31 17
Other intangible assets 56 70
Capitalized development costs 206 191
Total deferred tax liabilities 426 351
Net deferred tax asset $ 324 $ 397
In management’s judgment, it is more likely than not that the total deferred tax assets, net of valuation allowance, of approximately
$750 million will be realized in the foreseeable future. Realization of the net deferred tax assets is dependent on the Company’s
generation of sufficient future taxable income in the related tax jurisdictions to obtain benefit from the reversal of temporary
differences, net operating loss carryforwards, and tax credit carryforwards. The amount of deferred tax assets considered realizable is
subject to adjustments in future periods if estimates of future taxable income change.
U.S. federal, state and foreign net operating loss carryforwards (NOLs) totaled approximately $876 million and $891 million at
March 31, 2012 and 2011, respectively. The NOLs will expire as follows: $722 million between 2013 and 2032 and $154 million
may be carried forward indefinitely.
A valuation allowance has been provided for deferred tax assets that are not expected to be realized. The valuation allowance
decreased approximately $17 million and $12 million at March 31, 2012 and 2011, respectively. The decrease in the valuation
allowance at March 31, 2012 resulted primarily from the recognition of state NOLs due to a change in forecasted state taxable
income. The decrease in the valuation allowance at March 31, 2011 primarily related to the likelihood of utilization of NOLs.
No provision has been made for U.S. federal income taxes on approximately $1,999 million and $1,719 million at March 31, 2012
and 2011, respectively, of unremitted earnings of the Company’s foreign subsidiaries since the Company plans to permanently
reinvest all such earnings outside the United States. It is not practicable to determine the amount of tax associated with such
unremitted earnings.
At March 31, 2012, the gross liability for income taxes associated with uncertain tax positions, including interest and penalties, is
approximately $641 million (of which none is classified as current). In addition, at March 31, 2012, the Company has recorded
approximately $56 million of deferred tax assets for future deductions of interest and state income taxes related to these uncertain tax
positions. At March 31, 2011, the gross liability for income taxes associated with uncertain tax positions, including interest and
penalties, was approximately $620 million (of which approximately $26 million was classified as current). In addition, at March 31,
2011, the Company had recorded approximately $43 million of deferred tax assets for future deductions of interest and state income
taxes related to these uncertain tax positions.
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