Apple 2013 Annual Report Download - page 67

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 $643 million, $1.4
billion and $1.1 billion in 2013, 2012 and 2011, respectively, which were reflected as increases to common stock.
As of September 28, 2013 and September 29, 2012, the significant components of the Company’s deferred tax
assets and liabilities were (in millions):
2013 2012
Deferred tax assets:
Accrued liabilities and other reserves ....................................... $ 1,892 $ 1,346
Deferred revenue ...................................................... 1,475 1,145
Basis of capital assets and investments ..................................... 1,020 451
Share-based compensation ............................................... 458 411
Other ................................................................ 1,029 947
Total deferred tax assets ............................................. 5,874 4,300
Less valuation allowance .................................................... 0 0
Deferred tax assets, net of valuation allowance ................................... 5,874 4,300
Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries .................................. 18,044 14,712
Other ................................................................ 112 456
Total deferred tax liabilities .......................................... 18,156 15,168
Net deferred tax liabilities ................................................... $(12,282) $(10,868)
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 28, 2013, the total amount of gross unrecognized tax benefits was $2.7 billion, of which $1.4
billion, if recognized, would affect the Company’s effective tax rate. 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.
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