Logitech 2008 Annual Report Download - page 101

F-31
LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The difference between the provision for income taxes and the expected tax provision at the statutory
income tax rate is reconciled below (in thousands):
Year ended March 31,
2008 2007 2006
Expected tax provision at statutory income tax rates ........... $22,339 $21,722 $17,838
Income taxes at different rates ............................. 12,245 10,194 12,870
Research and development tax credits ....................... (1,572) (1,868) (140)
Other ................................................. (1,224) (4,339) (1,819)
Total provision for income taxes ........................... $31,788 $25,709 $28,749
The Company has negotiated a tax holiday on certain earnings in China which is effective from
January 2006 through December 2010. The tax holiday represents a tax exemption aimed to attract foreign
technological investment in China. The tax holiday decreased income tax expense by approximately $1.5
million and $2.5 million for fiscal years 2008 and 2007. The benefit of the tax holiday on net income per
share (diluted) was approximately $0.01 in both fiscal years.
Deferred income tax assets and liabilities consist of the following (in thousands):
March 31,
2008 2007
Deferred tax assets:
Net operating loss carry forwards ................................. $ 4,171 $ 457
Accruals..................................................... 29,977 32,856
Depreciation and amortization.................................... 6,630 5,999
Share-based compensation....................................... 7,504 4,033
Gross deferred tax assets............................................ 48,282 43,345
Deferred tax liabilities:
Acquired intangible assets....................................... (6,992) (4,981)
Gross deferred tax liabilities......................................... (6,992) (4,981)
Net deferred tax assets.............................................. $41,290 $38,364
The current and deferred tax provision is calculated based on estimates and assumptions that could
differ from the actual results reflected in income tax returns filed. Adjustments for differences between the
tax provisions and tax returns are recorded when identified, which is generally in the third or fourth quarter
of the subsequent year.
Management regularly assesses the ability to realize deferred tax assets recorded in the Company’s
entities based upon the weight of available evidence, including such factors as the recent earnings history
and expected future taxable income. In the event that 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.