Electronic Arts 2010 Annual Report Download - page 172

The differences between the statutory tax expense (benefit) rate and our effective tax expense (benefit) rate,
expressed as a percentage of loss before provision for (benefit from) income taxes, for the years ended March 31,
2010, 2009 and 2008 were as follows:
Year Ended March 31,
2010 2009 2008
Statutory federal tax (benefit) rate ................................... (35.0%) (35.0%) (35.0%)
State taxes, net of federal benefit .................................... (3.4%) (2.1%) (2.7%)
Differences between statutory rate and foreign effective tax rate ........... 4.2% 2.6% 1.9%
Valuation allowance .............................................. 17.2% 42.8% —
Research and development credits ................................... (1.1%) (1.6%) (1.5%)
Non-deductible acquisition-related costs and tax expense from integration
restructurings ................................................. 8.2% — 9.5%
Non-deductible goodwill impairment ................................ — 13.6% —
Non-deductible losses on strategic investments ......................... — 2.6% 8.2%
Loss on facility impairment ........................................ — 0.6% 3.5%
Non-deductible stock-based compensation ............................ 5.0% 3.7% 5.5%
Other .......................................................... 0.8% — 0.3%
Effective tax expense (benefit) rate .............................. (4.1%) 27.2% (10.3%)
Undistributed earnings of our foreign subsidiaries amounted to approximately $1.1 billion as of March 31, 2010.
Those earnings are considered to be indefinitely reinvested and, accordingly, no U.S. income taxes have been
provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, we would be subject
to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to
various foreign countries. It is not practicable to determine the income tax liability that might be incurred if these
earnings were to be distributed.
The components of net deferred tax assets, as of March 31, 2010 and 2009 consisted of (in millions):
As of March 31,
2010 2009
Deferred tax assets:
Accruals, reserves and other expenses ........................................ $141 $140
Tax credit carryforwards .................................................. 188 183
Stock-based compensation ................................................. 81 69
Amortization ............................................................ 16 14
Net operating loss & capital loss carryforwards ................................ 233 129
Total ................................................................ 659 535
Valuation allowance ...................................................... (466) (384)
Deferred tax asset net of valuation allowance ................................ 193 151
Deferred tax liabilities:
Depreciation ............................................................ (19) (20)
State effect on federal taxes ................................................ (50) (47)
Unrealized gain on marketable equity securities ................................ (19) (3)
Prepaids and other liabilities ............................................... (13) (11)
Total ................................................................ (101) (81)
Deferred tax asset, net .................................................. $ 92 $ 70
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