Apple 2009 Annual Report Download - page 79

Table of Contents
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.
As of September 26, 2009 and September 27, 2008, the significant components of the Company’
s deferred tax assets and liabilities were (in
millions):
A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate (35% in 2009,
2008 and 2007) to income before provision for income taxes for the three years ended September 26, 2009, is as follows (in millions):
The Company’
s income taxes payable have been reduced by the tax benefits from employee stock plan awards. For stock options, 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 Company had net tax benefits from employee stock plan awards of $246 million, $770 million and $398 million
in 2009, 2008 and 2007, respectively, which were reflected as increases to common stock.
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 recorded a tax benefit of $42 million in the
first quarter of 2009 to account for the retroactive effects of the research credit extension.
Uncertain Tax Positions
As discussed in Note 1, “Summary of Significant Accounting Policies”
the Company adopted new accounting principles on accounting for
uncertain tax positions in 2008. Under these new principles, tax positions are evaluated in a two-
step process. The Company first determines
whether it is more likely than not that a tax
76
2009 2008
Deferred tax assets:
Accrued liabilities and other reserves
$
2,133
$
1,295
Basis of capital assets and investments
180
173
Accounts receivable and inventory reserves
172
126
Other
683
550
Total deferred tax assets
3,168
2,144
Less valuation allowance
—
—
Deferred tax assets, net of valuation allowance
3,168
2,144
Deferred tax liabilities
-
Unremitted earnings of foreign subsidiaries
1,778
1,234
Net deferred tax assets
$
1,390
$
910
2009 2008 2007
Computed expected tax
$
2,795
$
2,414
$
1,753
State taxes, net of federal effect
228
159
140
Indefinitely invested earnings of foreign subsidiaries
(658
)
(492
)
(297
)
Nondeductible executive compensation
13
6
6
Research and development credit, net
(84
)
(21
)
(54
)
Other
(14
)
(5
)
(36
)
Provision for income taxes
$
2,280
$
2,061
$
1,512
Effective tax rate
29%
30%
30%