America Online 2010 Annual Report Download - page 97

Table of Contents
AOL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The significant components of AOL's deferred tax assets and liabilities were as follows (in millions):
December 31,
2010 2009
(recast)
Deferred tax assets:
Reserves and allowances $ 18.9 $ 38.8
Equity-based compensation 19.0 4.2
Tax loss and credit carryforwards 1,448.4 1,301.0
Intangible assets and goodwill 15.4 —
Other 212.9 239.8
Subtotal 1,714.6 1,583.8
Less: Valuation allowance (1,169.6) (1,002.4)
Total deferred tax assets 545.0 581.4
Deferred tax liabilities:
Capitalized software (19.3) (38.0)
Unrealized foreign exchange tax gain (110.6) (175.3)
Intangible assets and goodwill — (161.1)
Other (73.8) (27.9)
Total deferred tax liabilities (203.7) (402.3)
Net deferred tax assets $ 341.3 $ 179.1
AOL had net operating losses from various foreign jurisdictions of $4,094.0 million and $4,383.0 million as of December 31, 2010 and 2009,
respectively. Many of these foreign losses are attributable to specific operations and may not be utilized to offset taxable income of other operations of AOL.
The expiration period of the foreign net operating losses ranges from 2011 to indefinite, including approximately $4.9 million of Canadian net operating
losses set to expire in 2011. The valuation allowance outstanding at December 31, 2010 and 2009 is primarily attributable to the foreign net operating loss
carryforwards.
AOL had $456.9 million and $81.3 million of federal net operating loss carryforwards as of December 31, 2010 and 2009, respectively. Certain of these
federal net operating loss carryforwards are subject to statutory annual use limitations. AOL had approximately $1,057.4 million and $771.2 million of net
operating loss carryforwards in various state and local jurisdictions as of December 31, 2010 and 2009, respectively. Certain of these state tax losses are
subject to a valuation allowance because they are attributable to specific operations and may not be utilized against taxable income of other operations of
AOL. These federal, state and local net operating loss carryforwards will expire between 2011 and 2030.
AOL has a capital loss carryforward of $110.5 million as of December 31, 2010, which will expire by the end of 2015. Significant uncertainty exists
regarding the future realization of the $43.9 million deferred tax asset related to this capital loss carryforward and as a result, AOL has recorded a full
valuation allowance on this deferred tax asset as of December 31, 2010.
During the year ended December 31, 2010, AOL increased its valuation allowance by $167.2 million primarily related to foreign net operating losses
and federal capital losses. As of December 31, 2010, the total valuation allowance of $1,169.6 million consisted of $1,125.7 million on net operating loss
carryforwards and some foreign net deferred tax assets and $43.9 million on capital loss carryforwards. The total valuation allowance was established based
on management's determination that the deferred tax assets are not more likely
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