Apple 1998 Annual Report Download - page 54

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--INCOME TAXES (CONTINUED)
As of September 25, 1998, and September 26, 1997, the significant components of the Company's deferred tax assets and liabilities were (in
millions):
As of September 25, 1998, the Company had operating loss carryforwards for federal tax purposes of approximately $492 million, which
expire in 2011 and 2012, not including $264 million of operating loss carryforwards acquired from NeXT which expire in 2002 through 2012.
Utilization of the NeXT carryforwards is subject to certain limitations imposed by the Internal Revenue Code; $138 million is available for
immediate utilization as of September 25, 1998. The Company also has various state and foreign tax loss and credit carryforwards, the tax
effect of which is approximately $78 million and which expire between 2001 and 2013. Most of the remaining benefits from tax losses and
credits do not expire. As of September 25, 1998, a valuation allowance of $213 million was recorded against the deferred tax asset for the
benefits of tax losses that may not be realized. Realization of approximately $73 million of the asset representing tax loss and credit
carryforwards is dependent on the Company's ability to generate approximately $209 million of future U.S. taxable income. Management
believes that it is more likely than not that forecasted U.S. income, including income that may be generated as a result of certain tax planning
strategies, will be sufficient to utilize the tax carryforwards prior to their expiration in 2011 and 2012 to fully recover this asset.
The net change in the total valuation allowance in 1998 was a decrease of $5 million. During 1998, the Company recorded a deferred tax asset
and an offsetting valuation allowance of $92 million with respect to operating loss carryforwards acquired from NeXT.
51
SEPTEMBER 25, SEPTEMBER 26,
1998 1997
--------------- ---------------
Deferred tax assets:
Accounts receivable and inventory reserves.................... $ 87 $ 151
Accrued liabilities and other reserves........................ 83 126
Basis of capital assets and investments....................... 71 103
Tax losses and credits........................................ 447 315
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Total deferred tax assets..................................... 688 695
Less valuation allowance........................................ 213 218
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Net deferred tax assets......................................... 475 477
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Deferred tax liabilities:
Unremitted earnings of subsidiaries........................... 390 410
Other......................................................... 20 7
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Total deferred tax liabilities.................................. 410 417
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Net deferred tax asset.......................................... $ 65 $ 60
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