Sprint - Nextel 2007 Annual Report Download - page 119

SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(2) These amounts have been recorded directly to shareholders’ equity—paid-in capital on the consolidated
balance sheets.
(3) This amount has been recorded directly to shareholders’ equity—retained earnings on the consolidated
balance sheet.
We recognize deferred income taxes for the temporary differences between the carrying amounts of our
assets and liabilities for financial statement purposes and their tax bases. Deferred tax assets are also recorded for
operating loss, capital loss and tax credit carryforwards. The sources of the differences that give rise to the
deferred income tax assets and liabilities at December 31, 2007 and 2006, along with the income tax effect of
each, were as follows:
December 31, 2007 December 31, 2006
Current Long-Term Current Long-Term
(in millions)
Deferred tax assets
Net operating loss carryforwards ......................... $407 $ 1,053 $ 689 $ 1,245
Capital loss carryforwards ............................... — 45 — 45
Accruals and other liabilities ............................. 228 1,008 356 939
Tax credit carryforwards ................................ — 672 168 465
Pension and other postretirement benefits .................. — 84 — 93
635 2,862 1,213 2,787
Valuation allowance ...................................... (115) (608) (290) (663)
520 2,254 923 2,124
Deferred tax liabilities
Property, plant and equipment ........................... — 2,214 — 2,185
Intangibles ........................................... — 8,661 — 9,961
Investments .......................................... — 68 — 73
Other ............................................... 73 — — —
73 10,943 — 12,219
Current deferred tax asset ................................. $447 $ 923
Long-term deferred tax liability ............................ $ 8,689 $10,095
The foreign income included in income (loss) from continuing operations totaled $132 million in 2007, $52
million in 2006 and $27 million in 2005. We have no material unremitted earnings of foreign subsidiaries.
In 2006 and 2005, we acquired $756 million and $2.8 billion, respectively, 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, 2007, a valuation allowance of $477 million remains on these deferred tax benefits. If the benefits
for which a valuation allowance has been provided at the time of acquisition are recognized in 2008, 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. Any adjustment to the valuation allowance after 2008 would be
recorded to the statement of operations following the guidance in the recently issued SFAS No. 141R.
F-34