Intel 2005 Annual Report Download - page 71

Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During 2004, in connection with preparing and filing its 2003 federal tax return and preparing its state tax returns, the company reduced its 2004 tax
provision by $195 million. This reduction in the 2004 tax provision was primarily driven by tax benefits for export sales and state tax benefits for
divestitures that exceeded the amounts originally estimated in connection with the 2003 provision. Also during 2004, the company reversed previously
accrued taxes related primarily to the closing of a state income tax audit that reduced the tax provision for 2004 by $62 million.
The company reduced its tax provision for 2003 by approximately $758 million due to the tax benefits related to the sale of certain businesses and
assets through the sale of stock of acquired companies (see “Note 13: Acquisitions and Divestitures”).
The U.S. Internal Revenue Service (IRS) formally assessed certain adjustments to the amounts reflected by the company in its tax returns for the years
1999 through 2002. See “Note 18: Contingencies” for a discussion of these matters.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts for income tax purposes. Significant components of the company’s deferred tax assets and liabilities at fiscal year-
ends were
as follows:
The net deferred tax asset valuation allowance increased $11 million to $86 million at December 31, 2005 based on management’s assessments that it
is more likely than not that certain deferred tax assets will not be realized in the foreseeable future. The valuation allowance is composed of unrealized
state capital loss carry forwards and unrealized state credit carry forwards of $74 million, and operating loss of non-U.S. subsidiaries of $12 million.
67
(In Millions)
2005
2004
Deferred tax assets
Accrued compensation and other benefits
$
212
$
265
Accrued advertising
170
115
Deferred income
241
232
Inventory valuation
251
193
Impairment losses on equity investments
93
110
State credits and net operating losses
107
107
Intercompany profit in inventory
105
82
Unremitted earnings of non
-
U.S. subsidiaries
161
5
Other, net
273
92
1,613
1,201
Valuation allowance
(86
)
(75
)
Total deferred tax assets
$
1,527
$
1,126
Deferred tax liabilities
Depreciation
$
(806
)
$
(894
)
Unrealized gains on investments
(123
)
(82
)
Other, net
(117
)
(26
)
Total deferred tax liabilities
$
(1,046
)
$
(1,002
)
Net deferred tax assets
$
481
$
124
Reported as:
Current deferred tax assets
$
1,149
$
979
Non
-
current deferred tax assets
1
35
—
Non
-
current deferred tax liabilities
(703
)
(855
)
Net deferred taxes
$
481
$
124
1
Included in the
“
Deferred taxes and other assets
”
line item on the consolidated balance sheet.