Yahoo 2013 Annual Report Download - page 126

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of
deferred income tax assets and liabilities are as follows (in thousands):
December 31,
2012 2013
Deferred income tax assets:
Net operating loss and tax credit carryforwards ............................. $219,054 $ 148,060
Stock-based compensation expense ...................................... 81,910 66,583
Non-deductible reserves and expenses .................................... 265,751 431,374
Depreciation expense ................................................. 21,386 22,937
Unrealized investment gains ............................................ 3,584 2,878
Intangible assets ..................................................... 5,861 7,764
Gross deferred income tax assets .................................... 597,546 679,596
Valuation allowance .............................................. (51,503) (36,690)
Deferred income tax assets ......................................... $546,043 $ 642,906
Deferred income tax liabilities:
Purchased intangible assets ............................................ (29,960) (156,435)
Depreciation expense ................................................. (118,808) (86,641)
Investments in equity interests .......................................... (13,120) (323,368)
Restructuring liabilities ............................................... (6,547) (7,235)
Deferred income tax liabilities ...................................... $(168,435) $(573,679)
Net deferred income tax assets .......................................... $377,608 $ 69,227
As of December 31, 2013, the Company’s federal and state net operating loss carryforwards for income tax
purposes were approximately $299 million and $31 million, respectively. The federal and state net operating loss
carryforwards are subject to various limitations under Section 382 of the Internal Revenue Code and applicable
state tax law. If not utilized, the federal and state net operating loss carryforwards will begin to expire in 2021.
The federal research and development credit expired on December 31, 2011. On January 2, 2013, the American
Taxpayer Relief Act of 2012 was signed into law retroactively extending the credit for amounts paid or incurred
after December 31, 2011 and before January 1, 2014. As such, the provision for income taxes for the year ended
December 31, 2013 reflects the benefit of both the 2012 and 2013 federal research and development tax credit.
The Company’s state research tax credit carryforward for income tax purposes is approximately $177 million and
it can be carried forward indefinitely. Tax credit carryforwards that result from the exercise of employee stock
options are not recorded on the Company’s consolidated balance sheets and are accounted for as a credit to
additional paid-in capital if and when realized through a reduction in income taxes payable.
The Company has a valuation allowance of approximately $37 million as of December 31, 2013 against certain
deferred income tax assets that are not more likely than not to be realized in future periods. In evaluating the
Company’s ability to realize its deferred income tax assets, the Company considers all available positive and
negative evidence, including operating results, ongoing tax planning, and forecasts of future taxable income on a
jurisdiction by jurisdiction basis. The valuation allowance as of December 31, 2013 relates to foreign net
operating loss carryforwards that will reduce the provision for income taxes if and when recognized.
The U.S. Department of the Treasury issued final regulations on the deduction and capitalization of expenditures
related to tangible property for income tax purposes. These regulations apply to the Company’s tax year
beginning on January 1, 2014. Based on its assessment as of December 31, 2013, these regulations will not have
a material impact on the Company’s financial position, results of operations, or cash flows.
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