Logitech 2001 Annual Report Download - page 38

OO
Total..................................................................................................... $12,086 $ 7,511 $ 1,260
Deferred income tax assets and liabilities consist of the following:
March 31,
2001 2000
(In thousands)
Net operating loss carryforwards ................................................................. $10,613 $ 2,485
Research and development and other tax credit carryforwards ................... 6,307 5,794
Accruals ....................................................................................................... 20,556 13,606
Other ............................................................................................................ 1,014 1,073
Gross deferred tax assets ............................................................................ 38,490 22,958
Depreciation and amortization ..................................................................... (1,204) (831)
Unrealized gain on available-for-sale securities........................................... (520) —
Deferred tax liabilities related to intangible assets ....................................... (4,889) —
Deferred tax liabilities................................................................................... (6,613) (831)
Valuation allowance ..................................................................................... (24,346) (15,190)
Net deferred tax assets ................................................................................ $ 7,531 $ 6,937
Management regularly assesses the realizability of deferred tax assets recorded in the Company's subsidiaries based
upon the weight of available evidence, including such factors as the recent earnings history and expected future taxable
income. The methodology used by management to determine the amount of deferred tax assets that are more likely than
not to be realized is based upon the Company's recent earnings and estimated future taxable income in applicable tax
jurisdictions for approximately the next two years. Management believes that it is more likely than not that the Company
will not realize a portion of its deferred tax assets and, accordingly, a valuation allowance of $24.3 million has been
established for such amounts at March 31, 2001. In the event future taxable income is below management’s estimates or
is generated in tax jurisdictions different than projected, the Company could be required to increase the valuation
allowance for deferred tax assets. This would result in an increase in the Company’s effective tax rate.
At March 31, 2001, the Company’s foreign net operating loss and tax credit carryforwards for income tax purposes
were approximately $30.7 million and $6.3 million, respectively. If not utilized, these carryforwards will expire through
2020.
Deferred tax assets of approximately $5.9 million at March 31, 2001 pertain to certain tax credits and net operating
loss carryforwards resulting from the exercise of employee stock options. When recognized, through the reversal of the
valuation allowance placed on the deferred tax assets, the tax benefit of these credits and losses will be accounted for as
a credit to shareholders’ equity rather than as a reduction of the income tax provision.
The difference between the provision for income taxes and the expected tax provision at the weighted average tax
rate is reconciled below. The expected tax provision at the weighted average rate is generally calculated using pre-tax
accounting income or loss in each country multiplied by that country's applicable statutory tax rates.
Year ended March 31,
2001 2000 1999
(In thousands)
Expected tax provision (benefit) at weighted average rate............................ $12,665 $ 8,638 $ (1,082)
Non-deductible purchased in-process research and development ............... 655 — —
Increase (decrease) in valuation allowance .................................................. (1,380) (1,986) 2,895
Other ............................................................................................................. 146 859 (553)
Total provision for income taxes.................................................................... $12,086 $ 7,511 $ 1,260
Note 12 — Commitments and Contingencies:
The Company leases facilities under operating leases, certain of which require it to pay property taxes, insurance and
maintenance costs. Operating leases for facilities are generally renewable at the Company's option and usually include
escalation clauses linked to inflation.