Electronic Arts 2009 Annual Report Download - page 177

Annual Report
The components of the deferred tax assets, net, as of March 31, 2009 and 2008 consisted of (in millions):
As of March 31,
2009 2008
Deferred tax assets:
Accruals, reserves and other expenses ....................................... $140 $187
Tax credit carryforwards .................................................. 183 109
Stock-based compensation ................................................ 69 50
Amortization ........................................................... 14 —
Net operating loss & capital loss carryforwards ................................ 129 78
Total ................................................................ 535 424
Valuation allowance ..................................................... (384) (22)
Deferred tax asset net of valuation allowance ................................ 151 402
Deferred tax liabilities:
Depreciation ............................................................ (20) (41)
Amortization ........................................................... — (20)
State effect on federal taxes ................................................ (47) (34)
Unrealized gain on marketable equity securities ................................ (3) (3)
Prepaids and other liabilities ............................................... (11) (5)
Total ................................................................ (81) (103)
Deferred tax asset, net .................................................. $ 70 $299
The valuation allowance increased by $362 million in fiscal year 2009, primarily due to the increase in the
valuation allowance on U.S. deferred tax assets.
As of March 31, 2009, we have federal net operating loss (“NOL”) carry forwards of approximately $278 million
of which approximately $150 million is attributable to various acquired companies. These acquired net operating
loss carry forwards are subject to an annual limitation under Internal Revenue Code Section 382. The federal
NOL, if not fully realized, will begin to expire 2026. Furthermore, we have state net loss carry forwards of
approximately $338 million of which approximately $118 million is attributable to various acquired companies.
The state NOL, if not fully realized, will begin to expire 2016. We also have U.S. federal, California and Canada
tax credit carry forwards of $82 million, $80 million and $19 million, respectively. The U.S. federal tax credit
carry forwards will begin to expire 2010. The California and Canada tax credit carry forwards can be carried
forward indefinitely.
In February 2006, the FASB issued FIN No. 48 that clarifies the accounting and recognition for income tax
positions taken or expected to be taken in our tax returns. We adopted FIN No. 48 on April 1, 2007, and
recognized the cumulative effect of a change in accounting principle by recognizing a decrease in the liability for
unrecognized tax benefits of $18 million, with a corresponding increase to beginning retained earnings. We also
recognized an additional decrease in the liability for unrecognized tax benefits of $14 million with a
corresponding increase in beginning paid-in capital related to the tax benefits of employee stock options. In our
second quarter of fiscal year 2008, we increased the beginning retained earnings by approximately $1 million to
reflect an immaterial revision to the cumulative effect of the adoption of FIN No. 48.
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