Apple 2008 Annual Report Download - page 75

Download and view the complete annual report

Please find page 75 of the 2008 Apple annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 103

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 5—Income Taxes (Continued)
As of September 27, 2008 and September 29, 2007, the significant components of the Company’s deferred tax assets and liabilities were (in
millions):
As of September 27, 2008, the Company has tax loss and credit carryforwards in the tax effected amount of $47 million. The Company released
a valuation allowance of $5 million recorded against the deferred tax asset for the benefit of state operating losses. 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.
A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate (35% in 2008,
2007, and 2006) to income before provision for income taxes for the three fiscal years ended September 27, 2008, is as follows (in millions):
The Company’s income taxes payable have been reduced by the tax benefits from employee stock options and employee stock purchase
plan. The Company receives an income tax benefit calculated as the difference between the fair market value of the stock issued at the time of
the exercise and the option price, tax effected. The net tax benefits from employee stock option transactions were $770 million, $398 million,
and $419 million in 2008, 2007, and 2006, respectively, and were reflected as an increase to common stock in the Consolidated Statements of
Shareholders’ Equity.
On October 3, 2008, the Tax Extenders and Alternative Minimum Tax Relief Act of 2008 was signed into law. This bill, among other things,
retroactively extended the expired research and development tax credit. As a result, the Company expects to record a tax benefit of
approximately $42 million in the first quarter of fiscal year 2009 to account for the retroactive effects of the research credit extension.
72
2008
2007
Deferred tax assets:
Accrued liabilities and other reserves
$
1,295
$
679
Basis of capital assets and investments
173
146
Accounts receivable and inventory reserves
126
64
Tax losses and credits
47
8
Other
503
161
Total deferred tax assets
2,144
1,058
Less valuation allowance
—
5
Net deferred tax assets
2,144
1,053
Deferred tax liabilities
—
Unremitted earnings of subsidiaries:
1,234
803
Net deferred tax asset
$
910
$
250
2008
2007
2006
Computed expected tax
$
2,414
$
1,753
$
987
State taxes, net of federal effect
159
140
86
Indefinitely invested earnings of foreign subsidiaries
(492
)
(297
)
(224
)
Nondeductible executive compensation
6
6
11
Research and development credit, net
(21
)
(54
)
(12
)
Other items
(5
)
(36
)
(19
)
Provision for income taxes
$
2,061
$
1,512
$
829
Effective tax rate
30%
30%
29%