Microsoft 2012 Annual Report Download - page 66

The components of the deferred income tax assets and liabilities were as follows:
(In millions)
June 30,
2012
2011
Deferred Income Tax Assets
Stock-based compensation expense
$
882
$
1,079
Other expense items
965
1,321
Unearned revenue
571
463
Impaired investments
152
424
Loss carryforwards
532
90
Other revenue items
79
69
Deferred income tax assets
$
3,181
$
3,446
Less valuation allowance
(453
)
0
Deferred income tax assets, net of valuation allowance
$
2,728
$
3,446
Deferred Income Tax Liabilities
International earnings
$
(1,072
)
$
(1,266
)
Unrealized gain on investments
(830
)
(904
)
Depreciation and amortization
(670
)
(265
)
Other
(14
)
0
Deferred income tax liabilities
(2,586
)
(2,435
)
Net deferred income tax assets
$
142
$
1,011
Reported As
Current deferred income tax assets
$
2,035
$
2,467
Long-term deferred income tax liabilities
(1,893
)
(1,456
)
Net deferred income tax assets
$
142
$
1,011
The valuation allowance disclosed in the table above relates to a portion of a $2.0 billion net operating loss carryforward
generated primarily in foreign countries and acquired primarily through our acquisition of Skype that may not be realized.
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.
As of June 30, 2012, we have not provided deferred U.S. income taxes or foreign withholding taxes on temporary
differences of approximately $60.8 billion resulting from earnings for certain non-U.S. subsidiaries which are permanently
reinvested outside the U.S. The unrecognized deferred tax liability associated with these temporary differences was
approximately $19.4 billion at June 30, 2012.
Income taxes paid were $3.5 billion, $5.3 billion, and $4.1 billion in fiscal years 2012, 2011, and 2010, respectively.
Uncertain Tax Positions
As of June 30, 2012, we had $7.2 billion of unrecognized tax benefits of which $6.2 billion, if recognized, would affect our
effective tax rate. As of June 30, 2011, we had $6.9 billion of unrecognized tax benefits of which $5.9 billion, if recognized,
would have affected our effective tax rate.
Interest on unrecognized tax benefits was $154 million, $38 million, and $193 million in fiscal years 2012, 2011, and 2010,
respectively. As of June 30, 2012, 2011, and 2010, we had accrued interest related to uncertain tax positions of $939
million, $785 million, and $747 million, respectively, net of federal income tax benefits.