Electronic Arts 2000 Annual Report Download - page 61

Download and view the complete annual report

Please find page 61 of the 2000 Electronic Arts annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 72

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72

The components of the net deferred tax assets as of March 31, 2000 and 1999 consist of:
2000 1999
(in thousands)
Deferred tax assets:
Accruals, reserves and other expenses $ 70,131 $ 76,015
Total gross deferred tax assets 70,131 76,015
Less: valuation allowance – –
Net deferred tax assets $ 70,131 $ 76,015
Deferred tax liabilities:
Undistributed earnings of DISC (1,487) (1,784)
Prepaid royalty expenses (38,562) (43,681)
Fixed assets (3,249) –
Unrealized gains on marketable securities (68) (1,395)
Other –(949)
Total gross deferred tax liabilities $ (43,366) $ (47,809)
Net deferred tax asset $ 26,765 $ 28,206
At March 31, 2000, deferred tax assets of $26,963,000 were included in other current assets.
The differences between the statutory income tax rate and the Company’s effective tax rate, expressed as a percentage of
income before provision for income taxes, for the years ended March 31, 2000, 1999 and 1998 were as follows:
2000 1999 1998
Statutory Federal tax rate 35.0 % 35.0 % 35.0 %
State taxes, net of Federal benefit 1.5 1.5 1.0
Differences between statutory rate and foreign effective tax rate (2.8) (2.5) (2.2)
Research and development credits (1.7) (2.1) (0.6)
Nondeductible acquisition costs – 7.4 –
Other (1.0) (1.0) (0.2)
31.0 % 38.3 % 33.0 %
The Company provides for U.S. taxes on an insignificant portion of the undistributed earnings of its foreign subsidiaries
and does not provide taxes on the remainder. We have not provided for Federal income tax on approximately $165,000,000
of undistributed earnings of our foreign subsidiaries, since we intend to reinvest this amount in foreign subsidiary opera-
tions indefinitely.
The Company’s U.S. income tax returns for the years 1992 through 1995 have been examined by the Internal Revenue Service
(IRS). In 1998, the Company received a notice of deficiencies from the IRS. These deficiencies relate primarily to operations in
Puerto Rico, which the Company is contesting in Tax Court. The Company believes that any additional liabilities, if any, that
arise from the outcome of this examination will not be material to the Company’s consolidated financial statements.
EA 2000 AR
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS