EMC 2003 Annual Report Download - page 56

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The current year accrual includes amounts accrued for systems at the time of shipment, adjustments within the year for changes in estimated costs for
warranties on systems shipped in the year and changes in estimated costs for warranties on systems shipped in prior years. It is not practicable to determine
the amounts applicable to each of the components.
K. Income Taxes
Our provision (benefit) for income taxes consists of (table in thousands):
2003 2002 2001
Federal
Current $ 21,550 $(228,828) $ (36,440)
Deferred 20,432 27,958 (221,598)
41,982 (200,870) (258,038)
State
Current (19,343) (3,564) 344
Deferred (5,295) 7,830 (14,690)
(24,638) 4,266 (14,346)
Foreign
Current 91,776 11,144 194,209
Deferred (34,205) 7,679 8,852
57,571 18,823 203,061
Total provision (benefit) for income taxes $ 74,915 $(177,781) $ (69,323)
The effective income tax rate is based upon the income (loss) for the year, the composition of the income (loss) in different countries, and adjustments, if
any, for the potential tax consequences, benefits or resolutions of tax audits. A reconciliation of our income tax provision (benefit) to the statutory federal tax
rate is as follows:
2003 2002 2001
Statutory federal tax rate 35.0% (35.0)% (35.0)%
State taxes (benefit), net of federal taxes (benefit) (4.2) 1.8 (3.0)
International related tax items (17.0) (12.9) 38.9
Reduction of deferred tax assets due to liquidation of subsidiaries 3.5 6.1 9.8
U.S. tax credits (1.2) (4.2) (0.3)
Valuation allowance (5.1) (10.5) (4.4)
Acquisition and merger contingencies (5.9) (4.5) (17.5)
Permanent items, including IPR&D charges in 2003 6.3 (1.5) (1.6)
Other 1.7 0.7 1.1
13.1% (60.0)% (12.0)%
82
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For 2003, the income tax rate was favorably impacted by the resolution of several tax matters which aggregated $80.9 million and the mix of income
attributable to foreign versus domestic jurisdictions. In 2002, the income tax rate was favorably impacted by the resolution of international tax matters which
aggregated $67.7 million; such amount included the favorable resolution of an international tax audit, partially offset by a provision for tax liabilities on other
international matters. In 2001, as a result of the favorable resolution of a merger-related contingency, we recognized a benefit of $133.2 million; the benefit
was partially offset by providing for the potential tax consequences resulting from audits in several jurisdictions.
The components of the current and noncurrent deferred tax assets, net are as follows (table in thousands):
December 31,
2003
December 31,
2002
Current deferred tax assets:
Accounts and notes receivable $ 48,694 $ 51,169
Inventory 51,508 45,075
Accrued expenses 76,110 74,227
Deferred revenue 92,571 62,414