Humana 2003 Annual Report Download - page 85

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Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Deferred income tax balances reflect the impact of temporary differences between the tax bases of assets or
liabilities and their reported amounts in our consolidated financial statements, and are stated at enacted tax rates
expected to be in effect when the reported amounts are actually recovered or settled. Principal components of our
net deferred tax balances at December 31, 2003 and 2002 are as follows:
Assets (Liabilities)
2003 2002
(in thousands)
Investment securities ..................................... $(10,765) $(14,296)
Depreciable property and intangible assets .................... (80,255) (79,177)
Medical and other expenses payable ......................... 31,780 33,806
Professional liability risks ................................. 12,386 9,941
Compensation, severance, and other accruals .................. 42,720 61,246
Alternative minimum tax credit ............................. — 8,506
Net operating loss carryforwards ............................ 16,303 18,918
Capital loss carryforward .................................. 30,868 42,304
Valuation allowance—capital loss carryforward ................ (26,978) (36,470)
Total net deferred income tax assets ................. $16,059 $ 44,778
Amounts recognized in the consolidated balance sheets:
Other current assets .................................. $56,527 $ 59,144
Other long-term liabilities ............................. (40,468) (14,366)
Total net deferred income tax assets ................. $16,059 $ 44,778
At December 31, 2003, we had approximately $41.9 million of net operating losses to carryforward related
to prior acquisitions. These net operating loss carryforwards, if unused to offset future taxable income, will
expire in 2004 through 2019.
At December 31, 2003, we had approximately $79.4 million of capital losses to carryforward, primarily
related to the sale of our workers’ compensation business in 2000. These capital loss carryforwards, if unused to
offset future capital gains, will expire in 2005. A valuation allowance has been established for a portion of these
deferred tax assets.
Based on our historical record of producing taxable income and estimates of future capital gains and
profitability, we have concluded that future operating income and capital gains will be sufficient to give rise to
tax expense and capital gains to recover all deferred tax assets, net of the valuation allowance.
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