Apple 2014 Annual Report Download - page 67

As of September 27, 2014 and September 28, 2013, the significant components of the Company’s deferred tax assets and
liabilities were (in millions):
2014 2013
Deferred tax assets:
Accrued liabilities and other reserves $ 2,761 $ 1,892
Deferred revenue 1,787 1,475
Basis of capital assets and investments 898 1,020
Share-based compensation 454 458
Other 644 1,029
Total deferred tax assets 6,544 5,874
Less valuation allowance 00
Deferred tax assets, net of valuation allowance 6,544 5,874
Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries 21,544 18,044
Other 120 112
Total deferred tax liabilities 21,664 18,156
Net deferred tax liabilities $(15,120) $(12,282)
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 27, 2014, the total amount of gross unrecognized tax benefits was $4.0 billion, of which $1.4 billion, if
recognized, would affect the Company’s effective tax rate. 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.
The aggregate changes in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for 2014,
2013 and 2012, is as follows (in millions):
2014 2013 2012
Beginning Balance $2,714 $2,062 $1,375
Increases related to tax positions taken during a prior year 1,295 745 340
Decreases related to tax positions taken during a prior year (280) (118) (107)
Increases related to tax positions taken during the current year 882 626 467
Decreases related to settlements with taxing authorities (574) (592) (3)
Decreases related to expiration of statute of limitations (4) (9) (10)
Ending Balance $4,033 $2,714 $2,062
Apple Inc. | 2014 Form 10-K | 65