EMC 2006 Annual Report Download - page 78

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Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
J. Accrued Expenses
Accrued expenses consist of (table in thousands):
December 31,
2006
December 31,
2005
Salaries and benefits $ 595,691 $ 477,361
Product warranties 242,744 206,608
Restructuring (See Note C) 199,538 154,613
Other 554,049 441,275
$ 1,592,022 $ 1,279,857
Product Warranties
Systems sales include a standard product warranty. At the time of the sale, we accrue for systems' warranty costs. The initial systems' warranty accrual
is based upon our historical experience, expected future costs and specific identification of systems' requirements. Upon expiration of the initial warranty, we
may sell additional maintenance contracts to our customers. Revenue from these additional maintenance contracts is deferred and recognized ratably over the
service period. The following represents the activity in our warranty accrual for our standard product warranty (table in thousands):
Year Ended December 31,
2006
2005
2004
Balance, beginning of the year $ 206,608 $ 180,758 $ 118,816
Provision 158,799 127,388 146,526
Amounts charged to the accrual (122,663) (101,538) (84,584)
Balance, end of the year $ 242,744 $ 206,608 $ 180,758
The provision includes amounts accrued for systems at the time of shipment, adjustments 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. The provision in 2006 includes $34.4 million, and the amounts charged to the accrual in 2006 include $10.4 million, associated with
stock-based compensation expense as a result of the adoption of FAS No. 123R.
K. Income Taxes
Our provision for income taxes consists of (table in thousands):
2006
2005
2004
Federal:
Current $ 335,193 $ 511,173 $ 234
Deferred (115,835) (10,947) 236,167
219,358 500,226 236,401
State:
Current 3,982 31,670 1,703
Deferred (2,176) 3,549 9,208
1,806 35,219 10,911
Foreign:
Current (44,545) (20,592) 70,313
Deferred (13,955) 4,225 (3,784)