NVIDIA 2013 Annual Report Download - page 187

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Income Taxes
We recognize federal, state and foreign current tax liabilities or assets based on our estimate of taxes payable or refundable
in the current fiscal year by tax jurisdiction. We recognize federal, state and foreign deferred tax assets or liabilities, as
appropriate, for our estimate of future tax effects attributable to temporary differences and carryforwards; and we record a
valuation allowance to reduce any deferred tax assets by the amount of any tax benefits that, based on available evidence
and judgment, are not expected to be realized.
United States income tax has not been provided on a portion of earnings of our non-U.S. subsidiaries to the extent that
such earnings are considered to be indefinitely reinvested.
Our calculation of current and deferred tax assets and liabilities is based on certain estimates and judgments and involves
dealing with uncertainties in the application of complex tax laws. Our estimates of current and deferred tax assets and
liabilities may change based, in part, on added certainty or finality to an anticipated outcome, changes in accounting standards
or tax laws in the United States, or foreign jurisdictions where we operate, or changes in other facts or circumstances. In
addition, we recognize liabilities for potential United States and foreign income tax contingencies based on our estimate of
whether, and the extent to which, additional taxes may be due. If we determine that payment of these amounts is unnecessary
or if the recorded tax liability is less than our current assessment, we may be required to recognize an income tax benefit
or additional income tax expense in our financial statements, accordingly.
As of January 26, 2014, we had a valuation allowance of $244.5 million related to state and certain foreign deferred
tax assets that management determined are not likely to be realized due, in part, to projections of future taxable income and
potential utilization limitations of tax attributes acquired as a result of stock ownership changes. To the extent realization
of the deferred tax assets becomes more-likely-than-not, we would recognize such deferred tax asset as an income tax benefit
during the period.
Our deferred tax assets do not include the excess tax benefit related to stock-based compensation that are a component
of our federal and state net operating loss and research tax credit carryforwards in the amount of $427.9 million as of January
26, 2014. Consistent with prior years, the excess tax benefit reflected in our net operating loss and research tax credit
carryforwards will be accounted for as a credit to stockholders' equity, if and when realized. In determining if and when
excess tax benefits have been realized, we have elected to utilize the with-and-without approach with respect to such excess
tax benefits. We have also elected to ignore the indirect tax effects of stock-based compensation deductions for financial
and accounting reporting purposes, and specifically to recognize the full effect of the research tax credit in income from
operations.
We recognize the benefit from a tax position only if it is more-likely-than-not that the position would be sustained upon
audit based solely on the technical merits of the tax position. Our policy is to include interest and penalties related to
unrecognized tax benefits as a component of income tax expense. Please refer to Note 13 of the Notes to the Consolidated
Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information.
Goodwill
Goodwill is subject to our annual impairment test during the fourth quarter of our fiscal year, or earlier if indicators of
potential impairment exist, using either a qualitative or a quantitative assessment. Our impairment review process compares
the fair value of the reporting unit in which the goodwill resides to its carrying value. We have identified three reporting
units, GPU, Professional Solutions and Tegra Processor, for the purposes of completing our goodwill analysis. Goodwill
assigned to these reporting units as of January 26, 2014 was $135.3 million, $95.1 million and $412.8 million, respectively.
Determining the number of reporting units and the fair value of a reporting unit requires us to make judgments and involves
the use of significant estimates and assumptions. We also make judgments and assumptions in allocating assets and liabilities
to each of our reporting units. We base our fair value estimates on assumptions we believe to be reasonable but that are
unpredictable and inherently uncertain.