Electronic Arts 2015 Annual Report Download - page 149

Annual Report
The differences between the statutory tax expense rate and our effective tax expense (benefit) rate, expressed as a
percentage of income before provision for (benefit from) income taxes, for the fiscal years ended March 31,
2015, 2014 and 2013 were as follows:
Year Ended March 31,
2015 2014 2013
Statutory federal tax expense rate ........................................ 35.0% 35.0% 35.0%
State taxes, net of federal benefit ......................................... 0.1% (242.9)% (5.0)%
Differences between statutory rate and foreign effective tax rate ................ (22.3)% (142.9)% (15.2)%
Valuation allowance ................................................... (9.2)% 936.5% 35.0%
Research and development credits ........................................ (1.1)% (128.6)% (8.6)%
Differences between book and tax on sale of strategic investments .............. — — (15.2)%
Resolution of tax matters with authorities .................................. (0.5)% (657.1)% —
Non-deductible stock-based compensation ................................. 3.5% 385.7% 21.5%
Acquisition-related contingent consideration ............................... (0.2)% (185.7)% (16.5)%
Other ............................................................... 0.1% (14.3)% (1.5)%
Effective tax expense (benefit) rate ..................................... 5.4% (14.3)% 29.5%
During the fiscal year 2014, we made a one-time repatriation of $700 million from certain of our wholly-owned
subsidiaries. This repatriation did not have a material impact on our effective tax rate for fiscal year 2014 due to
the deferred tax valuation allowance.
Undistributed earnings of our foreign subsidiaries amounted to approximately $752 million as of March 31,
2015. 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, 2015 and 2014 consisted of (in millions):
As of March 31,
2015 2014
Deferred tax assets:
Accruals, reserves and other expenses ............................................. $193 $163
Tax credit carryforwards ....................................................... 358 462
Stock-based compensation ...................................................... 35 43
Net operating loss & capital loss carryforwards ...................................... 53 199
Total ..................................................................... 639 867
Valuation allowance ........................................................... (555) (675)
Deferred tax assets, net of valuation allowance .................................... 84 192
Deferred tax liabilities:
Depreciation ................................................................. (9) (12)
State effect on federal taxes ..................................................... (62) (63)
Amortization ................................................................. (23) (28)
Prepaids and other liabilities .................................................... (8) (9)
Total ..................................................................... (102) (112)
Deferred tax assets, net of valuation allowance and deferred tax liabilities .............. $ (18) $ 80
On April 1, 2014, we adopted ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net
Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. Under the new
accounting standard, an unrecognized tax benefit is required to be presented as a reduction to a deferred tax asset
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