Apple 2011 Annual Report Download - page 65

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As of September 24, 2011 and September 25, 2010, 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 2011,
2010 and 2009) to income before provision for income taxes for the three years ended September 24, 2011, 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 equity awards of $1.1 billion, $742 million and $246
million in 2011, 2010 and 2009, 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.
63
2011
2010
Deferred tax assets:
Accrued liabilities and other reserves
$
1,610
$
1,369
Basis of capital assets and investments
390
179
Share
-
based compensation
355
308
Other
795
707
Total deferred tax assets
3,150
2,563
Less valuation allowance
0
0
Deferred tax assets, net of valuation allowance
3,150
2,563
Deferred tax liabilities:
Unremitted earning of foreign subsidiaries
8,896
4,979
Other
272
150
Total deferred tax liabilities
9,168
5,129
Net deferred tax liabilities
$
(6,018
)
$
(2,566
)
2011
2010
2009
Computed expected tax
$
11,973
$
6,489
$
4,223
State taxes, net of federal effect
552
351
339
Indefinitely invested earnings of foreign subsidiaries
(3,898
)
(2,125
)
(647
)
Research and development credit, net
(167
)
(23
)
(84
)
Domestic production activities deduction
(168
)
(48
)
(36
)
Other
(9
)
(117
)
36
Provision for income taxes
$
8,283
$
4,527
$
3,831
Effective tax rate
24.2%
24.4%
31.8%