Ingram Micro 2011 Annual Report Download - page 72

INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
deferred tax assets related to foreign tax credit carryforwards of $44,628, along with an increase of $39,362 in the
valuation allowance on these foreign tax credit carryforwards at January 1, 2011, with the net amount reflecting
the amount more likely than not to be realized based on our current ability to generate the character of income
required to utilize these credits prior to expiry through 2020.
After multiple years of profitability, our operational performance in Brazil has weakened over the last two
years. Although net operating losses in Brazil can be carried forward indefinitely, and despite continuing to
execute against our performance improvement plan and making progress in re-staffing key management
positions throughout the year, such progress has been slower than originally planned. As we finished the third
quarter of 2011 forecasting a third consecutive year of pre-tax losses, we reevaluated all available positive and
negative evidence and ultimately concluded it was no longer more likely than not the deferred tax assets would
be realized. As such, we established a full reserve for all Brazilian deferred tax assets recorded to date, which
resulted in a non-cash charge of $24,810 that impacted both the third quarter and full year effective tax rate. As
of December 31, 2011, the negative evidence of continued losses continues to outweigh the positive evidence.
We will continue to work on improving the performance of our operations in Brazil and will monitor for
objectively verifiable positive evidence that may alter our conclusion as to the likelihood of realizing such
deferred tax assets in future periods.
At December 31, 2011, we had deferred tax assets related to net operating loss carryforwards of $149,134,
along with a valuation allowance of $122,129, with the net amount reflecting the amount more likely than not to
be realized. Of the remaining $27,005 of net deferred tax assets associated with NOL carryforwards, $26,402 has
no expiration date. Included in the amount with no expiration date at December 31, 2011 is $17,026 of deferred
tax assets for losses that were generated by our operations in Australia during 2011. Our total net deferred tax
assets also include $9,322 at December 31, 2011 for various other timing differences in Australia. As of
December 31, 2011, we believe it is more likely than not that all of our Australian deferred tax asset will be
realized. We monitor all of our other deferred tax assets for realizability in a similar manner to those described
above and will record a valuation allowance if circumstances change and we believe the weight of objectively
verifiable positive evidence no longer exceeds the negative evidence in each case.
At December 31, 2011, our total deferred tax assets related to foreign tax credit carryforwards in the U.S.
was $74,589 and our total valuation allowance related to such credit carryforwards was $53,980, with the net
amount reflecting the amount more likely than not to be realized based on our current ability to generate the
character of income required to utilize these credits prior to expiry through 2021.
The valuation allowance decreased by a net $45,869 during 2011 due to a combination of netting
movements. Factors generating increases include $28,387 of additional valuation allowance established against
our deferred tax assets by the end of 2011 and $11,147 in additional valuation allowance relating primarily to
operating losses in certain other subsidiaries that are currently not expected to be realized through future taxable
income in these entities. However, these increases were more than offset by an $85,403 decrease for utilization of
net operating losses to offset gains realized on only the local statutory and tax books of one of our EMEA
subsidiaries. As these statutory gains were eliminated in our consolidation, the utilization of the deferred tax
assets did not affect our consolidated tax provision.
We have not provided deferred taxes on certain undistributed earnings from our foreign subsidiaries that are
indefinitely reinvested. These undistributed earnings may become taxable upon an actual or deemed repatriation
of assets from the subsidiaries or a sale or liquidation of the subsidiaries. We estimate that our total net
undistributed earnings upon which we have not provided deferred tax total approximately $1,900,000 at
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