Apple 2010 Annual Report Download - page 72

Table of Contents
As of September 25, 2010 and September 26, 2009, 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 2010,
2009 and 2008) to income before provision for income taxes for the three years ended September 25, 2010, 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. For RSUs, the Company receives an income tax benefit upon the award’
s vesting equal to the tax effect of the
underlying stock’
s fair market value. The Company had net excess tax benefits from employee stock plan awards of $742 million, $246 million
and $770 million in 2010, 2009 and 2008, respectively, which were reflected as increases to common stock.
Uncertain Tax Positions
Tax positions are evaluated in a two-
step process. The Company first determines whether it is more likely than not that a tax position will be
sustained upon examination. If a tax position meets the more-likely-than-
not recognition threshold it is then measured to determine the amount
of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of
being realized upon ultimate settlement. The Company classifies gross interest and penalties and unrecognized tax benefits that are not expected
to result in payment or receipt of cash within one year as non-current liabilities in the Consolidated Balance Sheets.
As of September 25, 2010, the total amount of gross unrecognized tax benefits was $943 million, of which $404 million, if recognized, would
affect the Company’
s effective tax rate. As of September 26, 2009, the total amount of gross unrecognized tax benefits was $971 million, of
which $307 million, if recognized, would affect the Company’s effective tax rate.
69
2010 2009
Deferred tax assets:
Accrued liabilities and other reserves
$
1,300
$
1,030
Basis of capital assets and investments
179
180
Accounts receivable and inventory reserves
68
172
Stock
-
based compensation
308
87
Other
558
383
Total deferred tax assets
2,413
1,852
Less valuation allowance
0
0
Deferred tax assets, net of valuation allowance
2,413
1,852
Deferred tax liabilities
-
Unremitted earnings of foreign subsidiaries
4,979
2,774
Net deferred tax liabilities
$
(2,566
)
$
(922
)
2010
2009
2008
Computed expected tax
$
6,489
$
4,223
$
3,131
State taxes, net of federal effect
351
339
217
Indefinitely invested earnings of foreign subsidiaries
(2,125
)
(647
)
(500
)
Research and development credit, net
(23
)
(84
)
(21
)
Other
(165
)
0
1
Provision for income taxes
$
4,527
$
3,831
$
2,828
Effective tax rate
24%
32%
32%