Texas Instruments 2005 Annual Report Download - page 40

The primary components of deferred income tax assets and liabilities at December 31 were as follows:
December 31,
2005 2004
Deferred income tax assets:
Accrued retirement costs (defined benefit and retiree health care) ........................... $45 $ 152
Inventories and related reserves .............................................................. 315 329
Stock-based compensation ................................................................... 61 —
Accrued expenses ............................................................................ 260 328
Deferred loss and tax credits ................................................................. 372 443
Investments ................................................................................... 56 56
Other .......................................................................................... 108 66
1,217 1,374
Less valuation allowance ..................................................................... (36) (52)
1,181 1,322
Deferred income tax liabilities:
Property, plant and equipment ................................................................ (172) (325)
Intangibles .................................................................................... (11) (21)
Non-U.S. earnings ............................................................................. (6) (12)
Other .......................................................................................... (3) (1)
(192) (359)
Net deferred income tax asset ................................................................ $ 989 $ 963
As of December 31, 2005 and 2004, the net deferred income tax assets of $989 million and $963 million were presented in
the balance sheet, based on tax jurisdiction, as deferred income tax assets of $1.01 billion and $1.00 billion and deferred
income tax liabilities of $23 million and $40 million. We make an ongoing assessment regarding the realization of U.S. and
non-U.S. deferred tax assets. While these assets are not assured of realization, our assessment is that a valuation
allowance is not required for the remaining balance of the deferred tax assets. This assessment is based on our
evaluation of relevant criteria including the existence of (i) deferred tax liabilities that can be used to absorb deferred tax
assets, (ii) taxable income in prior carryback years, and (iii) future taxable income.
We have aggregate U.S. and non-U.S. tax loss carryforwards of approximately $96 million of which $90 million expire
through the year 2023.
19. Commitments and Contingencies
Italian Grants: Italian government auditors have substantially completed a review, conducted in the ordinary course, of
approximately $250 million of grants from the Italian government to TI’s former memory operations in Italy for 13 separate
projects. The auditors have raised a number of issues relating to compliance with grant requirements and the eligibility of
specific expenses for the grants. As of December 31, 2005, the auditors have issued audit reports on 12 of the 13
projects. The Ministry of Industry is responsible for reviewing the auditors’ findings. Depending on the Ministry’s decision,
the review may result in a demand from the Italian government that we repay a portion of the grants. We believe that the
grants were obtained and used in compliance with applicable law and contractual obligations. As of December 31, 2005,
the Ministry has published final decrees on 12 of the projects representing approximately $175 million of grants. We do
not expect the outcome to have a material adverse impact on our financial condition, results of operations or liquidity.
Venture Capital Commitments: We have investments in certain venture capital funds and have committed to provide
additional capital to those funds. As appropriate investments are entered into, the venture capital general partners may
draw upon those committed additional funds. As of December 31, 2005, we may be required to provide an additional
$44 million when the committed funds are called by the venture capital funds’ general partners.
Leases: We conduct certain operations in leased facilities and also lease a portion of our data processing and other
equipment. The lease agreements frequently include purchase and renewal provisions and require us to pay taxes,
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TEXAS INSTRUMENTS 2005 ANNUAL REPORT