Salesforce.com 2016 Annual Report Download - page 76
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During the third quarter of fiscal 2013, we recorded for GAAP purposes a valuation allowance against a
significant portion of our U.S. deferred tax assets. During fiscal 2014, we recorded a partial valuation allowance
release, primarily in connection with the acquisition of ExactTarget. The increasing number of tax adjustments
reflected below was the result of the GAAP valuation allowance and the Company’s increasing acquisition
activities. The following table for fiscal 2014 reflects the calculation of our non-GAAP tax expense:
Fiscal Year Ended January 31,
Non-GAAP tax expense (in thousands): 2014
GAAP tax benefit .................................... $(125,760)
GAAP to Non-GAAP adjustments—tax effects of:
Stock-based expenses, amortization of purchased
intangibles and amortization of debt discount, net (1) . . 229,277
Deferred tax asset partial valuation release ............ 25,048
State income tax credits not benefited (2) .............. 5,325
Acquisitions-related costs (3) ....................... (19,708)
Other, net ....................................... 2,787
Total adjustments .................................... 242,729
Non-GAAP tax expense ............................... $116,969
(1) The Company excluded stock-based expenses, amortization of purchased intangibles, and amortization of
debt discount, net, in reporting its non-GAAP net income. Accordingly, the Company excluded the related
tax effects of these items. The related tax effects were computed by applying the relevant statutory tax rate
to these items for each respective jurisdiction.
(2) During fiscal 2014, California mandated a change to the way it apportioned income to the state, which
significantly reduced the Company’s California income tax expense. Accordingly, for computing non-
GAAP tax expense, the Company did not recognize tax benefits related to certain California research and
development tax credits as the Company believed these credits may not be realized given the lowered
California income tax expense.
(3) During fiscal 2014, the Company excluded certain tax effects related to acquisitions in computing its non-
GAAP tax expense. The majority of this adjustment was attributable to non-cash tax costs associated with
the transfer of purchased intangibles. This non-cash tax item was excluded because the decisions which
gave rise to these non-cash tax costs were neither made to increase revenue nor directly related to
performance in any particular period, but were made for the Company’s long term benefit over multiple
periods. The remainder of this adjustment included the tax effects of legal and accounting fees incurred to
facilitate transactions, which amount was not material. The related tax effects were computed by applying
the relevant statutory tax rate to these items for each respective jurisdiction.
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