Apple 2002 Annual Report Download - page 58

The foreign provision for income taxes is based on foreign pretax earnings of approximately $284 million, $363 million and $1.019 billion in
2002, 2001, and 2000, respectively. As of September 28, 2002, approximately half of the Company's cash, cash equivalents, and short-term
investments is held by foreign subsidiaries and is generally based in U.S. dollar-denominated holdings. Amounts held by foreign subsidiaries
would be subject to U.S. income taxation on repatriation to the United States. The Company's consolidated financial statements fully provide
for any related tax liability on amounts that may be repatriated, aside from undistributed earnings of certain of the Company's foreign
subsidiaries that are intended to be indefinitely reinvested in operations outside the United States. U.S. income taxes have not been provided on
a cumulative total of $755 million of such earnings. It is not practicable to determine the income tax liability that might be incurred if these
earnings were to be distributed.
Deferred tax assets and liabilities reflect the effects of tax losses, credits, and the future income tax effects of temporary differences between
the consolidated 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.
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As of September 28, 2002 and September 29, 2001, the significant components of the Company's deferred tax assets and liabilities were (in
millions):
As of September 28, 2002, the Company had operating loss carryforwards for federal tax purposes of approximately $72 million, which expire
from 2009 through 2021. These carryforwards are comprised of remaining operating loss carryforwards acquired from NeXT and other
acquisitions, the utilization of which is subject to certain limitations imposed by the Internal Revenue Code. The Company also has Federal
credit carryforwards and various state and foreign tax loss and credit carryforwards, the tax effect of which is approximately $94 million and
which expire between 2003 and 2022. The remaining benefits from tax losses and credits do not expire. As of September 28, 2002, a valuation
allowance of $30 million was recorded against the deferred tax asset for the benefits of tax losses that may not be realized. The valuation
allowance relates primarily to the operating loss carryforwards acquired from NeXT and other acquisitions. Management believes it is more
likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with the
tax effects of the deferred tax liabilities, will be sufficient to fully recover the remaining deferred tax assets.
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Deferred
4
2
(2
)
33
23
35
Provision for income taxes
$
22
$
(15
)
$
306
2002 2001
Deferred tax assets:
Accounts receivable and inventory reserves $
23
$
26
Accrued liabilities and other reserves
102
110
Basis of capital assets and investments
35
54
Tax losses and credits
209
319
Total deferred tax assets
369
509
Less valuation allowance
30
33
Net deferred tax assets
339
476
Deferred tax liabilities:
Unremitted earnings of subsidiaries
308
489
Available-for-sale securities
1
14
Other
26
18
Total deferred tax liabilities
335
521
Net deferred tax asset (liability)
$
4
$
(45
)