NVIDIA 2005 Annual Report Download - page 86

NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
The tax effect of temporary differences that gives rise to significant portions of the deferred tax assets and liabilities are presented
below:
January 30, January 25,
2005 2004
Deferred tax assets: (In thousands)
Net operating loss carryforwards $ 101,238 $ 105,503
Accruals and reserves, not currently deductible for tax purposes 13,373 10,286
Property, equipment and intangible assets 17,182 19,194
Research and other tax credit carryforwards 113,856 99,806
Gross deferred tax assets 245,649 234,789
Less valuation allowance (190,563) (182,669)
Net deferred tax assets 55,086 52,120
Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries (72,575) (57,468)
Net deferred tax liability $ (17,489) $ (5,348)
As of January 30, 2005, we had a valuation allowance of $190.6 million. Of the total valuation allowance, $145.7 million is
attributable to certain net operating loss and tax credit carryforwards resulting from the exercise of employee stock options. The tax
benefit of these net operating loss and tax credit carryforwards, if and when realization is sustained, would be accounted for as a credit
to stockholders' equity. Of the remaining valuation allowance as of January 30, 2005, $19.9 million relates to federal and state tax
attributes acquired in certain acquisitions for which realization of the related deferred tax assets was determined not more likely than
not to be realized due, in part, to potential utilization limitations as a result of stock ownership changes, and $25.0 million relates to
certain state deferred tax assets that management determined not more likely than not to be realized due, in part, to projections of
future taxable income. To the extent realization of the deferred tax assets related to certain acquisitions becomes probable, recognition
of these acquired tax benefits would first reduce goodwill to zero, then reduce other non−current intangible assets related to the
acquisition to zero with any remaining benefit reported as a reduction to income tax expense. To the extent realization of the deferred
tax assets related to certain state tax benefits becomes probable, we would recognize an income tax benefit in the period such asset is
more likely than not to be realized.
As of January 30, 2005, we had a federal net operating loss carryforward of approximately $274.4 million and cumulative state net
operating loss carryforwards of approximately $144.4 million. The federal net operating loss carryforward will expire beginning in
fiscal 2012 and the state net operating loss carryforwards will begin to expire in fiscal 2007 according to the rules of each particular
state. As of January 30, 2005, we had federal research and experimentation tax credit carryforwards of approximately $72.6 million
that will begin to expire in fiscal 2008; and federal foreign tax credit carryforwards of approximately $0.2 million that will begin to
expire in fiscal 2011. The research and experimentation tax credit carryforward attributable to states is approximately $57.8 million, of
which approximately $55.6 million is attributable to the State of California and may be carried over indefinitely, and approximately
$2.2 million is attributable to various other states and will expire beginning in fiscal 2016 according to the rules of each particular
state. We have other California state tax credit carryforwards of approximately $4.9 million that will begin to expire in fiscal 2006.
Utilization of net operating losses and tax credit carryforwards may be subject to limitations due to ownership changes and other
limitations provided by the Internal Revenue Code and similar state provisions. If such a limitation applies, the net operating loss and
tax credit carryforwards may expire before full utilization.
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