eTrade 2003 Annual Report Download - page 96
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Table of Contents
Index to Financial Statements
Deferred income taxes are recorded when revenues and expenses are recognized in different periods for financial statement and tax return
purposes. The temporary differences and tax carry-forwards that created deferred tax assets and deferred tax liabilities are as follows (in
thousands):
The Company maintains a valuation allowance of $70.2 million and $92.2 million at December 31, 2003 and 2002, respectively, on the
deferred tax assets, as full realization of net operating loss carry-forwards related to certain foreign countries and Federal net operating losses
and capital loss carry-forwards are not expected. The decrease in these valuation allowances in 2003 is primarily related to the reversal of
valuations allowance on capital loss carry-forwards, as a result of the Company’s investment gains on SBI.
The effective tax rates differed from the Federal statutory rates as follows:
83
December 31,
2003
2002
Deferred tax assets:
Reserves and allowances
$
18,680
$
4,128
Net unrealized gain on equity investments and Bank assets held
-
for
-
sale
28,240
70,152
Net operating loss carry
-
forwards
74,713
85,873
Depreciation and amortization
6,089
15,713
Deferred compensation
9,881
13,781
Capitalized technology development
14,400
12,033
Tax credits
16,130
9,905
Restructuring reserve and related write
-
downs
74,948
75,354
Other
10,207
10,488
Total deferred tax assets
253,288
297,427
Deferred tax liabilities:
Internally developed software
(14,076
)
(29,518
)
Acquired intangibles
(52,688
)
(75,163
)
Basis differences in investments
(10,713
)
22,918
Purchased software
(3,024
)
(3,024
)
Retained servicing rights
(9,831
)
104
Other
(8,256
)
(8,274
)
Total deferred tax liabilities
(98,588
)
(92,957
)
Valuation allowance
(70,156
)
(92,246
)
Net deferred tax asset
$
84,544
$
112,224
Year Ended December 31,
2003
2002
2001
Federal statutory rate
35.0
%
35.0
%
(35.0
)%
State income taxes, net of Federal tax benefit
3.5
4.7
(3.2
)
Nondeductible acquisition costs
—
—
0.1
Nondeductible compensation
0.3
1.0
3.9
Difference between statutory rate and foreign effective tax rate and establishment of valuation
allowance for foreign deferred tax assets
3.8
(1.3
)
7.7
Amortization of goodwill
—
—
3.4
Change in valuation allowance
(5.2
)
5.4
13.9
Other
(1.2
)
(0.9
)
1.6
Effective tax rate
36.2
%
43.9
%
(7.6
)%