Hasbro 2008 Annual Report Download - page 68

The components of earnings before income taxes, determined by tax jurisdiction, are as follows:
2008 2007 2006
United States ........................................ $208,125 165,274 113,761
International ........................................ 232,930 297,108 227,713
$441,055 462,382 341,474
The components of deferred income tax expense arise from various temporary differences and relate to
items included in the statements of operations. The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities at December 28, 2008 and December 30, 2007 are:
2008 2007
Deferred tax assets:
Accounts receivable.......................................... $ 16,764 20,524
Inventories ................................................ 20,226 24,608
Losses and tax credit carryforwards .............................. 34,438 39,094
Operating expenses .......................................... 42,947 42,759
Pension ................................................... 34,065 9,990
Other compensation .......................................... 31,331 24,477
Postretirement benefits........................................ 12,647 13,507
Other .................................................... 39,147 37,274
Gross deferred tax assets .................................... 231,565 212,233
Valuation allowance.......................................... (11,755) (36,254)
Net deferred tax assets ...................................... 219,810 175,979
Deferred tax liabilities:
Convertible debentures ....................................... 47,608 40,185
International earnings not indefinitely reinvested .................... 24,641 20,422
Depreciation and amortization of long-lived assets ................... 40,509 15,833
Other .................................................... 11,035 2,408
Deferred tax liabilities ...................................... 123,793 78,848
Net deferred income taxes ....................................... $ 96,017 97,131
Hasbro has a valuation allowance for deferred tax assets at December 28, 2008 of $11,755, which is a
decrease of $24,499 from $36,254 at December 30, 2007. The valuation allowance pertains to United States
and International loss carryforwards, some of which have no expiration and others that would expire beginning
in 2009. The decrease in the valuation allowance is primarily attributable to the generation of sufficient capital
gains in 2008 to utilize prior year capital losses.
Based on Hasbro’s history of taxable income and the anticipation of sufficient taxable income in years
when the temporary differences are expected to become tax deductions, the Company believes that it will
realize the benefit of the deferred tax assets, net of the existing valuation allowance.
Deferred income taxes of $53,285 and $53,040 at the end of 2008 and 2007, respectively, are included as
a component of prepaid expenses and other current assets, and $53,031 and $45,855, respectively, are included
as a component of other assets. At the same dates, deferred income taxes of $4,245 and $81, respectively, are
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HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)