Orbitz 2008 Annual Report Download - page 104

ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Income Taxes (Continued)
(a)
The current portion of the deferred income tax liability at December 31, 2006 of $3 million is included in the other current liabilities line item in our
consolidated balance sheet.
(b)
The non-current portion of the deferred income tax liability at December 31, 2006 of $4 million is included in the other non-current liabilities line item
in our consolidated balance sheet.
During 2007, we recorded a full valuation allowance against $30 million of foreign deferred tax assets related to portions of our U.K.-based business in
accordance with SFAS No. 109. SFAS No. 109 requires that companies assess whether valuation allowances should be established against their deferred tax
assets based on the consideration of all available evidence using a "more likely than not" standard. Prior to the IPO, we had the ability to offset these losses with
taxable income of Travelport subsidiaries and affiliates in the U.K. As a result of the IPO, these subsidiaries are no longer in our U.K. group and, as a result, their
income is not available to offset our losses in the U.K. group at December 31, 2007.
During the year ended December 31, 2007, we also recorded an adjustment to reduce the deferred tax assets and associated valuation allowance by
$115 million, resulting in no impact to the net deferred income tax asset. This adjustment related to the difference between the book and tax basis in the liability.
As of December 31, 2007, we had a valuation allowance of $330 million, $272 million of which was established in purchase accounting for the Blackstone
Acquisition. To the extent that any valuation allowances established in purchase accounting are reduced, these reductions will be recorded as adjustments to
goodwill rather than the provision for income taxes. The net deferred tax asset at December 31, 2007 and December 31, 2006 amounted to $15 million and
$55 million, respectively. These net deferred tax assets relate to temporary tax to book differences in non-U.S. jurisdictions, the realization of which is, in
management's judgment, more likely than not. We have assessed, based on experience with relevant taxing authorities, our expectations of future taxable income,
carry-forward periods available and other relevant factors, that we will be more likely than not to recognize this deferred tax asset.
As of December 31, 2007, we had U.S. federal and state net operating loss carry-forwards of approximately $67 million and $30 million, respectively,
which expire between 2020 and 2026. In addition, we had $382 million of non-U.S. net operating loss carry-forwards, most of which do not expire. No provision
has been made for U.S. federal or non-U.S. deferred income taxes on approximately $8 million of accumulated and undistributed earnings of foreign subsidiaries
at December 31, 2007. A provision has not been established because it is our present intention to reinvest the undistributed earnings indefinitely in those foreign
operations. The determination of the amount of unrecognized U.S. federal or non-U.S. deferred income tax liabilities for unremitted earnings at December 31,
2007 is not practicable.
We adopted the provisions of FIN 48 effective January 1, 2007. Given the inherent complexities of the business and that we are subject to taxation in a
substantial number of jurisdictions, we routinely assess the likelihood of additional assessment in each of the taxing jurisdictions. We have established a liability
for unrecognized tax benefits that management believes to be adequate. Once established, unrecognized tax benefits are adjusted if more accurate information is
available, or a change in circumstance or an event occurs necessitating a change to the liability.
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Source: Orbitz Worldwide, In, 10-K/A, August 28, 2008