eBay 2004 Annual Report Download - page 127

eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
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,
2003 2004
Deferred tax assets:
Net operating loss and credits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 186,142 $ 165,673
Accruals and allowances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38,344 57,648
Net unrealized (gains)losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,469 (6,596)
Net deferred tax assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 233,955 216,725
Valuation allowanceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (165,831) (158,602)
68,124 58,123
Deferred tax liabilities:
Acquisition-related intangibles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (107,064) (129,310)
Depreciation and amortization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (16,164) (54,357)
(123,228) (183,667)
$ (55,104) $(125,544)
As of December 31, 2004, our federal and state net operating loss carryforwards for income tax purposes
were approximately $605.8 million and $138.6 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 2006. Our federal and state research tax credit carryforwards for income tax purposes are
approximately $35.9 million and $35.3 million, respectively. If not utilized, the federal tax carryforwards will
begin to expire in 2021. We receive tax deductions from the gains realized by employees on the exercise of
certain non-qualiÑed stock options for which the beneÑt is recognized as a component of stockholders' equity.
We have evaluated the deferred tax assets relating to these stock option deductions along with our other
deferred tax assets and concluded that a valuation allowance is required for that portion of the total deferred
tax assets that are not considered more likely than not to be realized in future periods. To the extent that the
deferred tax assets with a valuation allowance become realizable in future periods, we will have the ability,
subject to carryforward limitations, to beneÑt from these amounts. When realized, the tax beneÑt of tax
deductions related to stock options are accounted for as a credit to additional paid-in capital rather than a
reduction of the income tax provision.
We have not provided for U.S. federal income and foreign withholding taxes on $669.2 million of
non-U.S. subsidiaries' undistributed earnings as of December 31, 2004, because such earnings are intended to
be indeÑnitely reinvested in the operations and potential acquisitions of our International Marketplace
segment. Upon distribution of those earnings in the form of dividends or otherwise, we would be subject to
U.S. income taxes (subject to an adjustment for foreign tax credits). It is not practicable to determine the
income tax liability that might be incurred if these earnings were to be distributed.
Note 16 Ì Subsequent Events:
On February 23, 2005, we acquired all outstanding securities of Rent.com for approximately $415 million
plus our acquisition costs, net of Rent.com's cash on hand. Rent.com is a leading Internet listing website in the
apartment and rental housing industry.
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