McKesson 2005 Annual Report Download - page 80

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Deferred tax balances consisted of the following:
We have income tax net operating loss carryforwards related to our U.K. operations of approximately $88.3 million, which have an
indefinite life.
We also have state income tax net operating loss carryforwards of approximately $259.6 million which will expire at various dates from
2006 through 2025. We believe that it is more likely than not that the benefit from certain state net operating loss carryforwards will not be
realized. In recognition of this risk, we have provided a valuation allowance of $3.9 million on the deferred tax assets relating to these state net
operating loss carryforwards.
In 2005, we have reversed a portion of the valuation allowance related to these state net operating loss carryforwards, of which
$10.2 million of the tax benefit, net of impairment, was credited to equity.
18. Financial Guarantees and Warranties
Financial Guarantees
We have agreements with certain of our customers’ financial institutions under which we have guaranteed the repurchase of inventory
(primarily for our Canadian business) at a discount in the event these customers are unable to meet certain obligations to those financial
institutions. Among other requirements, these inventories must be in resalable condition. We have also guaranteed loans, credit facilities and
the payment of leases for some customers; and we are a secured lender for substantially all of these guarantees. Customer guarantees range
from one to ten years and were primarily provided to facilitate financing for certain strategic customers. At March 31, 2005, the maximum
amounts of inventory repurchase guarantees and other customer guarantees were $179.5 million and $10.3 million of which a nominal amount
had been accrued.
In 2004, a Pharmaceutical Solutions customer filed for bankruptcy. Accordingly, we reviewed all amounts owed to us from this customer as
well as financial guarantees provided to third parties in favor of this customer, and
79
March 31,
(In millions) 2005 2004
Assets
Receivable allowances $74.6 $79.2
Deferred revenue 241.5 176.9
Compensation and benefit-related accruals 119.3 110.8
Deferred compensation 50.9 68.4
Intangibles 44.1 51.3
Investment valuation 15.3 15.8
Securities Litigation 475.0 —
Loss and credit carryforwards 51.7 45.8
Other 132.5 65.7
Subtotal 1,204.9 613.9
Less: valuation allowance (3.9) (20.4)
Total assets $ 1,201.0 $593.5
Liabilities
Basis differences for inventory valuation and other assets $ (767.2) $ (515.9)
Basis difference for fixed assets (53.2) (47.4)
Systems development costs (114.4)(115.5)
Retirement plans (15.2) (13.8)
Other (76.1) (57.0)
Total liabilities (1,026.1) (749.6)
Net deferred tax asset (liability) $ 174.9 $(156.1)
Current net deferred tax asset (liability) $ 149.8 $ (187.7)
Long term net deferred tax asset 25.1 31.6
Net deferred tax asset (liability) $ 174.9 $ (156.1)