WebEx 2002 Annual Report Download - page 50

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WEBEX COMMUNICATIONS, INC.
December 31, 2002, 2001 and 2000
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands except share and per share amounts)
WebEx uses the intrinsic-value method in accounting for its employee stock-based compensation plans. In
2000 and 1999, WebEx recorded deferred equity-based compensation for the difference at the grant date between
the exercise price of each stock option granted and the fair value of the underlying common stock. In addition, in
2002 and 2001 WebEx recognized additional equity-based compensation expense of $1,092 and $1,005,
respectively, for vesting modifications to existing awards primarily related to terminated employees.
NOTE 5. INCOME TAXES
Income tax expense for the year ended December 31, 2002 consists of current foreign and state tax expense.
Income tax expense for 2002, 2001 and 2000 differed from the amounts computed by applying the U.S. federal
income tax rate of 35% to pretax income (loss) as a result of the following:
Year Ended December 31,
2002 2001 2000
Expected income tax provision (benefit) at statutory rate ............ $5,919 $(9,671) $(28,149)
State and local income taxes .................................. 2 — —
Stock compensation related ................................... — 632 6,418
Warrants .................................................. — (1,441) 3
Foreign tax differential ...................................... 580 (5) —
Net operating loss (utilization) / not benefited .................... (6,041) 10,485 21,687
Other .................................................... 54 — 41
Totaltaxexpense........................................... $ 514 $ — $ —
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and
liabilities as of December 31, 2002 and 2001, are as follows:
2002 2001
Deferred tax assets:
Allowances and accruals ........................................ $ 3,998 $ 3,302
Equity-based compensation ...................................... 3,630 3,818
Property and equipment ......................................... 773 —
Intangible assets ............................................... 994 126
Equity investment .............................................. 407 305
Deferred revenue .............................................. 916 244
Net operating loss and tax credit carryforwards ....................... 27,691 35,626
Gross deferred tax assets ........................................ 38,409 43,421
Less valuation allowance ........................................ (38,407) (43,190)
Total deferred tax assets ..................................... 2 231
Deferred tax liabilities:
Property and equipment ......................................... — 229
Unrealized gain ................................................ 2 2
Total deferred tax liabilities .................................. 2 231
Net deferred tax assets ...................................... $ — $ —
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