eBay 2000 Annual Report Download - page 87

eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Under SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences of
diÅerences between the carrying amounts of assets and liabilities and their respective tax bases using enacted
tax rates in eÅect for the year in which the diÅerences are expected to reverse. SigniÑcant deferred tax assets
and liabilities consist of the following (in thousands):
December 31,
1999 2000
Deferred tax assets:
Net operating loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 84,807 $ 103,628
Accruals and reserves ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,990 9,819
Depreciation and amortization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,798 10,313
Net unrealized loss on marketable securities ÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 1,080
Net deferred tax assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 98,595 124,840
Valuation allowanceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (83,894) (101,586)
14,701 23,254
Deferred tax liabilities:
Net unrealized gains on marketable securities ÏÏÏÏÏÏÏÏÏÏÏÏ (3,731) Ì
$ 10,970 $ 23,254
As of December 31, 2000, eBay's federal and state net operating loss carryforwards for income tax
purposes were approximately $274.9 million and $128.0 million, respectively. If not utilized, the federal net
operating loss carryforwards will begin to expire in 2019, and the state net operating loss carryforwards will
begin to expire in 2004. Deferred tax assets of approximately $101.6 million at December 31, 2000 pertain to
certain net operating loss carryforwards resulting from the exercise of employee stock options. When
recognized, the tax beneÑt of these losses are accounted for as a credit to additional paid-in capital rather than
a reduction of the income tax provision.
In connection with the acquisition of ButterÑelds by eBay, ButterÑelds' status as an S Corporation was
terminated and became subject to federal and state income taxes. The supplemental pro forma information
below includes an increase to the provisions for income taxes based upon a combined federal and state tax rate
of 42%. This amount approximates the statutory tax rates that would have been applied if ButterÑelds had
been taxed as a C Corporation during the periods prior to its acquisition. Because the acquisition of the
ButterÑelds companies has been accounted for as a pooling of interests, there has been no adjustment to the
historical carrying values of the real estate holdings. However, these properties are subject to increases in tax
basis which will result in a higher depreciable basis for income and property tax purposes. As a result, a
deferred tax asset and a corresponding increase to stockholder's equity of approximately $8.8 million was
recorded in the second quarter of 1999 for the diÅerence between the Ñnancial statement carrying amounts
and the tax basis of the related net assets upon the closing of the transaction.
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