XM Radio 2011 Annual Report Download - page 123

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and
deferred tax liabilities are presented below:
December 31,
2011 2010
Deferred tax assets:
Net operating loss carryforwards ............................. $3,025,621 $ 3,091,869
GM payments and liabilities ................................. 194,976 308,776
Deferred revenue ......................................... 410,812 346,221
Severance accrual ......................................... 21 266
Accrued bonus ........................................... 17,296 16,599
Expensed costs capitalized for tax ............................ 35,227 44,149
Loan financing costs ....................................... 1,575 1,568
Investments .............................................. 40,880 62,742
Stock based compensation .................................. 89,862 118,507
Other ................................................... 42,924 53,260
Total deferred tax assets .................................. 3,859,194 4,043,957
Deferred tax liabilities:
Depreciation of property and equipment ....................... (405,892) (379,180)
FCC license .............................................. (781,742) (773,850)
Other intangible assets ..................................... (188,988) (209,489)
Other ................................................... (189) —
Total deferred tax liabilities ............................... (1,376,811) (1,362,519)
Net deferred tax assets before valuation allowance ................. 2,482,383 2,681,438
Valuation allowance ......................................... (3,360,740) (3,551,288)
Total deferred tax liability ................................ $ (878,357) $ (869,850)
The difference in the net deferred tax liability of $878,357 and $869,850 at December 31, 2011 and 2010,
respectively, is primarily the result of the amortization of our FCC licenses which are amortized over 15 years for
tax purposes but not amortized for book purposes. This net deferred tax liability cannot be offset against our
deferred tax assets under GAAP since it relates to indefinite-lived assets and is not anticipated to reverse in the
same period.
As a result of the Merger, we have had several ownership changes under Section 382 of the Internal
Revenue Code, which may limit our ability to utilize tax deductions. Internal Revenue Code Section 382 imposes
substantial restrictions on the utilization of net operating losses and tax credits in the event of a corporation’s
ownership change. Currently, our ownership changes do not limit our ability to utilize future tax deductions and
so no adjustments were made to gross deferred tax assets as a result of the Merger. As of December 31, 2011, we
had NOL carryforwards of approximately $7,844,000 for federal and state income tax purposes available to
offset future taxable income. These NOL carryforwards expire on various dates beginning in 2014 and ending in
2028.
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