E-Z-GO 2006 Annual Report Download - page 86

The tax effects of temporary differences that give rise to significant portions of our net deferred tax assets and liabilities were as follows:
December 30, December 31,
(In millions) 2006 2005
Deferred tax assets:
Deferred revenue $16 $18
Warranty and product maintenance reserves 115 109
Self-insured liabilities, including environmental 97 83
Deferred compensation 190 170
Allowance for credit losses 57 59
Amortization of goodwill and other intangibles — 22
Loss carryforwards 79 45
Obligation for postretirement benefits 330 6
Foreign currency debt 21 —
Other, principally timing of other expense deductions 147 157
Total deferred tax assets 1,052 669
Valuation allowance for deferred tax assets (159) (116)
$ 893 $ 553
Deferred tax liabilities:
Finance group transactions, principally leasing $ (597) $ (525)
Property, plant and equipment, principally depreciation (76) (94)
Inventory (53) (62)
Amortization of goodwill and other intangibles (19) —
Foreign currency debt — (10)
Total deferred tax liabilities (745) (691)
Net deferred tax asset (liability) $ 148 $ (138)
We have recognized a valuation allowance at December 30, 2006 and December 31, 2005 of $159 million and $116 million, respectively, to offset
certain deferred tax assets due to the uncertainty of realizing the related benefits.
We have net operating loss and credit carryforwards at the end of each year as follows:
December 30, December 31,
(In millions) 2006 2005
Non-U.S. net operating loss carryforwards with no expiration $ 146 $ 78
Non-U.S. net operating loss carryforwards expiring through 2021 $ 15 $ 17
Federal credit carryforwards beginning to expire in 2015 – discontinued operations $ 60 $ 18
Federal and state credit carryforwards beginning to expire in 2015 $ 11 $ 5
Our income taxes payable for federal and state purposes have been reduced by the tax benefits we receive from employee stock options. The
income tax benefits we receive for certain stock options are calculated as the difference between the fair market value of the stock issued at the
time of exercise and the option price, tax effected. See Note 11 for the net tax benefits to employee stock options.
The undistributed earnings of our foreign subsidiaries approximated $376 million at the end of 2006. We consider the undistributed earnings
on which taxes have not previously been provided to be indefinitely reinvested; therefore, tax is not provided on these earnings. If the earnings
on which tax has not been provided had been distributed in 2006, our taxes, net of foreign tax credits, would have increased by approximately
$19 million.
On October 22, 2004, the American Jobs Creation Act (“AJCA”) was signed into law and includes a deduction of 85% of certain foreign earnings
that are repatriated, as defined in the AJCA. During 2005, we repatriated $435 million in cash from foreign subsidiaries under this provision
related to continuing operations. Tax expense of $0.9 million and $11 million was recognized in 2005 and 2004, respectively, related to this repa-
triation. In addition, we repatriated approximately $183 million in cash related to discontinued operations and recorded related tax expense of
$2 million in 2005.
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Textron Inc.