Goldman Sachs 2002 Annual Report Download - page 87

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N O T E 13
INCOME TAXES
Deferred income taxes reflect the net tax effects of tem-
porary differences between the financial reporting and
tax bases of assets and liabilities. These temporary differ-
ences result in taxable or deductible amounts in
future years and are measured using the tax rates and
laws that will be in effect when such differences are
expected to reverse.
The components of the net tax expense reflected in the consolidated statements of earnings are set forth below:
YEAR ENDED NOVEMBER
(IN MILLIONS) 2002 2001 2000
Current taxes
U.S. federal $ 543 $ 781 $1,063
State and local 35 64 285
Non-U.S. 331 489 957
Total current tax expense 909 1,334 2,305
Deferred taxes
U.S. federal 7(9) (299)
State and local 102 95 49
Non-U.S. 121 (34) (102)
Total deferred tax expense/(benefit) 230 52 (352)
Net tax expense $1,139 $1,386 $1,953
N otes to Consolidated Financial Statem ents
Significant components of the firm’s deferred tax assets and liabilities are set forth below:
AS OF NOVEMBER
(IN MILLIONS) 2002 2001
Deferred tax assets
Compensation and benefits $1,415 $1,768
Unrealized losses 173 —
Other, net 185 197
1,773 1,965
Valuation allowance(1) (17) (7)
Total deferred tax assets 1,756 1,958
Deferred tax liabilities
Depreciation and amortization 207 111
Unrealized gains —20
Total deferred tax liabilities 207 131
Net deferred tax assets $1,549 $1,827
(1) Relates primarily to the ability to utilize certain state and local and foreign tax credits.
The firm permanently reinvests eligible earnings of cer-
tain foreign subsidiaries that were incorporated for U.S.
income tax purposes at the end of 2001 and, accordingly,
does not accrue any U.S. income taxes that would arise if
such earnings were repatriated. As of November 2002,
this policy resulted in an unrecognized net deferred tax
liability of approximately $33 million attributable to
reinvested earnings of approximately $209 million.
Additionally, during 2002, the valuation allowance was
increased by $10 million, primarily due to an increase in
certain state and local and foreign tax credits. Acquired net
operating loss carryforwards of approximately $58 million
are subject to annual limitations on utilization and will
begin to expire in 2018.
84 G O L D M A N SA CH S 2002 AN N UA L R EPO RT