Sprint - Nextel 2012 Annual Report Download - page 149

Table of Contents
SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Deferred income taxes are recognized 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 as of
December 31, 2012 and 2011 , along with the income tax effect of
each, were as follows:
The realization of deferred tax assets, including net operating loss carryforwards, is dependent on the generation of future taxable income
sufficient to realize the tax deductions, carryforwards and credits. However, our history of consecutive annual losses reduces our ability to rely on
expectations of future income in evaluating the ability to realize our deferred tax assets. Valuation allowances on deferred tax assets are recognized if it
is determined that it is more likely than not that the asset will not be realized. As a result, the Company recognized an increase in the valuation
allowance of
$1.8 billion and $1.3 billion for the years ended December 31, 2012 and 2011 , respectively, on deferred tax assets primarily related to federal
and state net operating loss carryforwards generated during the period. The increase in the carrying amount of Sprint's valuation allowance for the
years ended
December 31, 2012 and 2011 in excess of amounts recognized as a change in the valuation allowance in the current period income tax
expense is primarily associated with the tax effect of items reflected in other comprehensive income, other accounts, and the expiration of net operating
loss and tax credit carryforwards. We do not expect to record significant tax benefits on future net operating losses until our circumstances justify the
recognition of such benefits.
We believe it is more likely than not that our remaining deferred income tax assets, net of the valuation allowance, will be realized based on
current income tax laws and expectations of future taxable income stemming from the reversal of existing deferred tax liabilities. Uncertainties
surrounding income tax law changes, shifts in operations between state taxing jurisdictions and future operating income levels may, however, affect
the ultimate realization of all or some of these deferred income tax assets.
Income tax expense of
$154 million , $254 million , and $166 million for the years ended December 31, 2012 , 2011 , and 2010 , respectively, is
primarily attributable to taxable temporary differences from amortization of FCC licenses. FCC licenses are amortized over
15 years for income tax
purposes but, because these licenses have an indefinite life, they are not amortized for financial statement reporting purposes. This difference results
in net deferred income tax expense since the taxable temporary difference cannot be scheduled to reverse during the loss carryforward period. In
addition, during 2012, a
$69 million tax benefit was recorded as a result of the successful
F - 28
December 31, 2012
December 31, 2011
Current
Long-Term
Current
Long-Term
(in millions)
Deferred tax assets
Net operating loss carryforwards
$
—
$
4,398
$
—
$
3,873
Capital loss carryforwards
—
126
—
52
Accruals and other liabilities
577
1,061
461
1,094
Tax credit carryforwards
—
431
—
471
Pension and other postretirement benefits
—
430
—
324
577
6,446
461
5,814
Valuation allowance
(472
)
(5,183
)
(284
)
(3,580
)
105
1,263
177
2,234
Deferred tax liabilities
Property, plant and equipment
—
420
—
1,527
Intangibles
—
6,855
—
6,720
Investments
—
802
—
855
Other
104
233
47
118
104
8,310
47
9,220
Current deferred tax asset
$
1
$
130
Long - term deferred tax liability
$
7,047
$
6,986