Apple 1996 Annual Report Download - page 43

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Deferred tax assets and liabilities reflect the future income tax effects of temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply to taxable income in
the years in which those temporary differences are expected to be recovered or settled.
At September 27, 1996, and September 29, 1995, the significant components of the Company's deferred tax assets and liabilities were:
(In millions)
At September 27, 1996, the Company had operating loss carryforwards for tax purposes of approximately $273 million, which expire
principally in 2011. Substantially all of the remaining benefits from tax losses and credits do not expire.
The net change in the total valuation allowance was negligible in 1996 and an increase of $3 million in 1995.
A reconciliation of the provision (benefit) for income taxes, with the amount computed by applying the statutory federal income tax rate (35%
in 1996, 1995, and 1994) to income (loss) before provision (benefit) for income taxes, is as follows:
(In millions)
The Internal Revenue Service ("IRS") has proposed federal income tax deficiencies for the years 1984 through 1991, and the Company has
made certain prepayments thereon. The Company contested the proposed deficiencies for the years 1984 through 1988, and most of the issues
in dispute for these years have been resolved. On June 29, 1995, the IRS issued a notice of deficiency proposing increases to the amount of the
Company's federal income taxes for the years 1989 through 1991. The Company has filed a petition with the United States Tax Court to contest
these alleged tax deficiencies. Management believes that adequate provision has been made for any adjustments that may result from these tax
examinations.
41
September 27, 1996 September 29, 1995
Deferred tax assets:
Accounts receivable and
inventory reserves $105 $ 87
Accrued liabilities and other
reserves 139 85
Basis of capital assets and
investments 82 82
Tax losses and credits 175 --
Total deferred tax assets 501 254
Less: Valuation allowance 14 14
Net deferred tax assets 487 240
Deferred tax liabilities:
Unremitted earnings of
subsidiaries 467 648
Other 11 27
Total deferred tax liabilities 478 675
Net deferred tax asset (liability) $ 9 $(435)
1996 1995 1994
Computed expected tax $(453) $236 $175
State taxes, net of federal benefit (48) 10 17
Research and development tax credit -- (1) (1)
Indefinitely invested earnings of foreign
subsidiaries -- (21) (49)
Valuation allowance -- 3 9
Other individually immaterial items 22 23 39
Provision (benefit) for income taxes $(479) $250 $190
Effective tax rate 37% 37% 38%