Microsoft 2009 Annual Report Download - page 63

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PAGE 63
The components of the deferred income tax assets and liabilities were as follows:
(In millions)
June 30, 2009 2008
Deferred income tax assets:
Stock-based compensation expense $ 2,004 $2,225
Other expense items 1,595 1,933
Unearned revenue 743 928
Impaired investments 236 331
Other revenue items 120 91
Deferred income tax assets $ 4,698 $5,508
Deferred income tax liabilities:
International earnings $ (1,191) $
(
1,300)
Unrealized gain on investments (516) (513)
Other (499) (729)
Deferred income tax liabilities (2,206 )
(
2,542)
Net deferred income tax assets $ 2,492 $2,966
Reported as:
Current deferred income tax assets $ 2,213 $2,017
Long-term deferred income tax assets 279 949
Net deferred income tax assets $ 2,492 $2,966
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets
and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when the taxes are
actually paid or recovered.
We have not provided deferred U.S. income taxes or foreign withholding taxes on temporary differences of
approximately $18.0 billion resulting from earnings for certain non-U.S. subsidiaries which are permanently
reinvested outside the United States. The unrecognized deferred tax liability associated with these temporary
differences is approximately $5.4 billion.
Income taxes paid were $6.6 billion in fiscal year 2009, $5.4 billion in fiscal year 2008, and $5.2 billion in fiscal
year 2007.
UNCERTAIN TAX POSITIONS
As of June 30, 2009, we had $5.4 billion of unrecognized tax benefits of which $4.4 billion, if recognized, would
affect our effective tax rate. As of June 30, 2008, we had $3.2 billion of unrecognized tax benefits of which $2.3
billion, if recognized, would affect our effective tax rate.
Interest and penalties related to unrecognized tax benefits are included in income tax expense. Such interest
totaled $230 million in fiscal year 2009 and $121 million in fiscal year 2008. As of June 30, 2009 and 2008, we had
accrued interest related to uncertain tax positions of $554 million and $324 million, respectively, net of federal
income tax benefits, on our balance sheets.