Mattel 2004 Annual Report Download - page 75
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Deferred income taxes are provided principally for net operating loss carryforwards, research and
development expenses, loss on the disposition of Learning Company, certain reserves, depreciation, employee
compensation-related expenses and certain other expenses that are recognized in different years for financial
reporting and income tax purposes. Mattel’s deferred income tax assets (liabilities) are comprised of the
following (in thousands):
As of Year End
2004 2003
Loss on disposition of Learning Company ..................................... $186,407 $ —
Tax credit carryforwards .................................................. 174,203 156,742
Research and development expenses ......................................... 161,607 132,877
Loss carryforwards ....................................................... 136,782 338,333
Intangible assets ......................................................... 72,088 85,321
Allowances and reserves .................................................. 62,321 68,133
Deferred compensation .................................................... 46,306 40,484
Other .................................................................. 43,958 49,013
Gross deferred income tax assets ........................................ 883,672 870,903
Intangible assets ......................................................... (31,088) (24,451)
Other .................................................................. (17,235) (36,115)
Gross deferred income tax liabilities ..................................... (48,323) (60,566)
Deferred income tax asset valuation allowances ................................ (205,277) (208,878)
Net deferred income tax assets .............................................. $630,072 $ 601,459
As of year end 2004, Mattel has loss carryforwards totaling $308.4 million and tax credit carryforwards of
$174.2 million. Utilization of these loss and tax credit carryforwards is subject to annual limitations. Mattel’s
loss and tax credit carryforwards expire in the following periods (in millions):
Loss
Carryforwards
Tax Credit
Carryforwards
2005 – 2009 ........................................................ $ 71.3 $ 43.6
Thereafter .......................................................... 48.7 120.4
No expiration date ................................................... 188.4 10.2
Total .......................................................... $ 308.4 $ 174.2
Management considered all available evidence and determined that a valuation allowance of $205.3 million
was required as of year end 2004 for those loss and tax credit carryforwards that are not expected to provide
future tax benefits. Management believes that it is more likely than not that Mattel will generate sufficient
taxable income in the appropriate carryforward periods to realize the benefit of the remaining net deferred
income tax assets of $630.1 million.
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