Apple 2012 Annual Report Download - page 63

between the fair market value of the stock issued at the time of the exercise and the exercise price. 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 $1.4 billion, $1.1
billion and $742 million in 2012, 2011 and 2010, respectively, which were reflected as increases to common
stock.
As of September 29, 2012 and September 24, 2011, the significant components of the Company’s deferred tax
assets and liabilities were (in millions):
2012 2011
Deferred tax assets:
Accrued liabilities and other reserves ....................................... $ 2,101 $ 1,610
Basis of capital assets and investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 447 390
Share-basedcompensation ............................................... 395 355
Other ................................................................ 1,094 795
Total deferred tax assets ............................................. 4,037 3,150
Less valuation allowance .................................................... 0 0
Deferred tax assets, net of valuation allowance ................................... 4,037 3,150
Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries .................................. 14,712 8,896
Other ................................................................ 193 272
Total deferred tax liabilities .......................................... 14,905 9,168
Net deferred tax liabilities ................................................... $(10,868) $ (6,018)
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.
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 29, 2012, the total amount of gross unrecognized tax benefits was $2.1 billion, of which
$889 million, if recognized, would affect the Company’s effective tax rate. As of September 24, 2011, the total
amount of gross unrecognized tax benefits was $1.4 billion, of which $563 million, if recognized, would affect
the Company’s effective tax rate.
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