Sprint - Nextel 2006 Annual Report Download - page 128

deferred income tax assets and liabilities at December 31, 2006 and 2005, along with the income tax effect of
each, were as follows:
Current Long-Term Current Long-Term
December 31, 2006, December 31, 2005,
(in millions)
Deferred tax assets
Net operating loss carryforwards ...................... $ 689 $ 1,245 $1,835 $ 1,182
Capital loss carryforwards ........................... — 45 354 77
Accruals and other liabilities ......................... 356 939 451 267
Tax credit carryforwards ............................ 168 465 — 556
Pension and other postretirement benefits ................ — 93 — 675
1,213 2,787 2,640 2,757
Valuation allowance ................................. (290) (663) (556) (514)
923 2,124 2,084 2,243
Deferred tax liabilities
Property, plant and equipment ........................ — 2,185 — 2,220
Intangibles ....................................... — 9,961 — 9,594
Investments ...................................... — 73 225 834
Other ........................................... — — 70 —
— 12,219 295 12,648
Current deferred tax asset ............................ $ 923 $1,789
Long-term deferred tax liability ....................... $10,095 $10,405
The foreign income (loss) included in income (loss) from continuing operations totaled $52 million in 2006,
$27 million in 2005 and $(203) million in 2004. We have no material unremitted earnings of foreign
subsidiaries.
In 2006 and 2005, we acquired $756 million and $2.8 billion of potential income tax benefits related to net
operating loss carryforwards, capital loss carryforwards and tax credit carryforwards in the Sprint-Nextel
merger, and the PCS Affiliate and Nextel Partners acquisitions. In 1999, we acquired $193 million of potential
tax benefits related to net operating loss carryforwards in the acquisitions of broadband fixed wireless
companies. In 1998, we acquired $229 million of potential tax benefits related to net operating loss
carryforwards in the controlling interest acquisition of our wireless joint venture, which we call the PCS
Restructuring. The benefits from these acquisitions are subject to certain realization restrictions under various
tax laws. As of December 31, 2006, a valuation allowance of $743 million remains on these deferred tax
benefits. If the benefits for which a valuation allowance has been provided at the time of acquisition are
subsequently recognized, they will first reduce goodwill or intangibles resulting from the application of the
purchase method of accounting for these transactions. If goodwill and intangibles related to the acquisition are
reduced to zero, any additional tax benefits recognized would reduce income tax expense.
In connection with the PCS Restructuring, we are required to reimburse the former cable company partners of
the joint venture for net operating loss and tax credit carryforward benefits generated before the PCS
Restructuring if realization by us produces a cash benefit that would not otherwise have been realized. The
reimbursement will equal 60% of the net cash benefit received by us and will be made to the former cable
company partners in shares of our stock. The unexpired carryforward benefits subject to this requirement total
$193 million.
F-51
SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)