AFFX » Topics » 8. Income Taxes

These excerpts taken from the AFFX 10-Q filed May 8, 2009.

NOTE 10—INCOME TAXES

 

The provision for income tax for the first quarter of 2009 was approximately $0.5 million.  The provision for income tax results from foreign taxes in profitable locations.

 

Due to the Company’s history of cumulative operating losses, management concluded that, after considering all the available objective evidence, it is not more likely that not that all the Company’s net deferred tax assets will be realized. Accordingly, all of the U.S. deferred tax assets, net of FIN 48 reserves, continue to be subject to a valuation allowance as of March 31, 2009.

 

As of March 31, 2009, there have been no material changes to the total amounts of unrecognized tax benefits.

 

Income Taxes

 

Income tax expense is based on pretax financial accounting income. Under the asset and liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. We must assess the likelihood that the resulting deferred tax assets will be realized. To the extent we believe that realization is not more likely than not, we establish a valuation allowance. Significant estimates are required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance to be recorded against our deferred tax assets. Some of these estimates are based on interpretations of existing tax laws or regulations. We believe that our estimates are reasonable and that our reserves for income tax related uncertainties are adequate. Various internal and external factors may have favorable or unfavorable effects on our future effective tax rate. These factors include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, changes in the valuation of our deferred tax assets or liabilities, future levels of research and development spending, nondeductible expenses, changes in overall levels, character, geographical mix of pretax earnings, and ultimate outcomes of income tax audits.

 

These excerpts taken from the AFFX 10-K filed Mar 2, 2009.

INCOME TAXES

        Income tax expense is based on pretax financial accounting income. Under the asset and liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. We must assess the likelihood that the resulting deferred tax assets will be realized. To the extent we believe that realization is not more likely than not, we establish a valuation allowance. Significant estimates are required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance to be recorded against our deferred tax assets. For example, in 2008, we recorded an increase of $75.1 million to our valuation allowance against our net deferred tax assets and have placed a full valuation allowance on U.S. deferred tax assets, net of FIN 48 reserves, as a result of negative evidence based on our cumulative net loss position. Some of these estimates are based on interpretations of existing tax laws or regulations. We believe that our estimates are reasonable and that our reserves for income tax related uncertainties are adequate. Various internal and external factors may have favorable or unfavorable effects on our future effective tax rate. These factors include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, changes in the valuation of our deferred tax assets or liabilities, future levels of research and development spending, nondeductible expenses, changes in overall levels, character, geographical mix of pretax earnings, and ultimate outcomes of income tax audits.

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        In December 2007, the FASB issued SFAS No. 141R, Business Combinations ("SFAS 141R"). The accounting treatment related to pre-acquisition uncertain tax positions will change when SFAS No. 141R becomes effective, which will be in first quarter of our fiscal year 2009. See "Recent Accounting Pronouncements" under Summary of Significant Accounting Policies included in the Consolidated Financial Statements in this annual report for further discussion.

        The total amount of unrecognized tax benefits as of December 31, 2008 was approximately $18.5 million. If recognized, the amount of unrecognized tax benefits that would impact income tax expense is $1.4 million. As of December 31, 2008, we do not anticipate any material changes to the amount of unrecognized tax benefit during the next 12 months.

        We classify interest and penalties related to tax positions as components of income tax expense. For the year ended December 31, 2008, the amount of accrued interest and penalties related to tax uncertainties was approximately $0.1 million for a total cumulative amount of $0.3 million of non-current income taxes payable as of December 31, 2008.

        We file U.S. federal, state, and foreign income tax returns in jurisdictions with varying statutes of limitations. The 1992 through 2008 tax years generally remain subject to examination by federal and state tax authorities. In significant foreign jurisdictions, the 2005 through 2008 tax years generally remain subject to examination by their respective tax authorities.

INCOME TAXES



        Income tax expense is based on pretax financial accounting income. Under the asset and liability method, deferred tax assets and
liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are
expected to reverse. We must assess the likelihood that the resulting deferred tax assets will be realized. To the extent we believe that realization is not more likely than not, we establish a
valuation allowance. Significant estimates are required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance to be recorded against our
deferred tax assets. For example, in 2008, we recorded an increase of $75.1 million to our valuation allowance against our net deferred tax assets and have placed a full valuation allowance on
U.S. deferred tax assets, net of FIN 48 reserves, as a result of negative evidence based on our cumulative net loss position. Some of these estimates are based on interpretations of existing
tax laws or regulations. We believe that our estimates are reasonable and that our reserves for income tax related uncertainties are adequate. Various internal and external factors may have favorable
or unfavorable effects on our future effective tax rate. These factors include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or
regulations, changes in the valuation of our deferred tax assets or liabilities, future levels of research and development spending, nondeductible expenses, changes in overall levels, character,
geographical mix of pretax earnings, and ultimate outcomes of income tax audits.



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        In December 2007, the FASB issued SFAS No. 141R, Business Combinations ("SFAS 141R"). The accounting
treatment related to pre-acquisition uncertain tax positions will change when SFAS No. 141R becomes effective, which will be in first quarter of our fiscal year 2009. See "Recent
Accounting Pronouncements" under Summary of Significant Accounting Policies included in the Consolidated Financial Statements in this annual report for further discussion.



        The
total amount of unrecognized tax benefits as of December 31, 2008 was approximately $18.5 million. If recognized, the amount of unrecognized tax benefits that would
impact income tax expense is $1.4 million. As of December 31, 2008, we do not anticipate any material changes to the amount of unrecognized tax benefit during the next 12 months.



        We
classify interest and penalties related to tax positions as components of income tax expense. For the year ended December 31, 2008, the amount of accrued interest and penalties
related to tax uncertainties was approximately $0.1 million for a total cumulative amount of $0.3 million of non-current income taxes payable as of December 31, 2008.



        We
file U.S. federal, state, and foreign income tax returns in jurisdictions with varying statutes of limitations. The 1992 through 2008 tax years generally remain subject to
examination by federal and state tax authorities. In significant foreign jurisdictions, the 2005 through 2008 tax years generally remain subject to examination by their respective tax authorities.



INCOME TAXES

        Income tax expense is based on pre-tax financial accounting income. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. To the extent the Company believes that realization is not more likely than not, the Company establishes a valuation allowance. Significant estimates are required in determining the Company's provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance to be recorded against our net deferred tax asset. Some of these estimates are based on interpretations of existing tax laws or regulations. The Company believes that its estimates are reasonable and that its reserves for income tax related uncertainties are adequate. Various internal and external factors may have favorable or unfavorable effects on the Company's future effective tax rate. These factors include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, changes in the valuation of our deferred tax assets or liabilities, future levels of research and development spending, nondeductible expenses, changes in overall levels of characterization and geographical mix of pretax earnings (losses) and ultimate outcomes of income tax audits.

INCOME TAXES



        Income tax expense is based on pre-tax financial accounting income. Under the liability method, deferred tax assets and
liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are
expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. To the extent the Company believes that realization is not more likely than
not, the Company establishes a valuation allowance. Significant estimates are required in determining the Company's provision for income taxes, our deferred tax assets and liabilities, and any
valuation allowance to be recorded against our net deferred tax asset. Some of these estimates are based on interpretations of existing tax laws or regulations. The Company believes that its estimates
are reasonable and that its reserves for income tax related uncertainties are adequate. Various internal and external factors may have favorable or unfavorable effects on the Company's future
effective tax rate. These factors include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, changes in the valuation
of our deferred tax assets or liabilities, future levels of research and development spending, nondeductible expenses, changes in overall levels of characterization and geographical mix of pretax
earnings (losses) and ultimate outcomes of income tax audits.



This excerpt taken from the AFFX 8-K filed Feb 13, 2009.

8.            Income Taxes

 

There is no current provision for income taxes due to the taxable losses incurred by the Company from inception to September 30, 2008. As of September 30, 2008 there have been no material changes to the composition of the Company’s deferred tax assets, upon which a 100% valuation allowance has been recorded due to uncertainty as to their realization.

 

This excerpt taken from the AFFX 10-Q filed Nov 7, 2008.

Income Taxes

 

Income tax expense is based on pretax financial accounting income.  Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  We must then assess the likelihood that the resulting deferred tax assets will be realized.  To the extent we believe that realization is not more likely than not, we establish a valuation allowance.  Significant estimates are required in determining our provision for income taxes, our deferred tax assets and liabilities, unrecognized tax benefits, and any valuation allowance to be recorded against our net deferred tax asset.  Some of these estimates are based on interpretations of existing tax laws or regulations.  We believe that our estimates are reasonable and that our reserves for income tax related uncertainties are adequate. Various

 

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internal and external factors may have favorable or unfavorable effects on our future effective tax rate.  These factors include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, changes in the valuation of deferred tax assets or liabilities, future level of research and development spending, nondeductible expenses, changes in overall levels and geographical mix of actual and forecast pretax earnings, and ultimate outcomes of income tax audits.

 

This excerpt taken from the AFFX 10-Q filed Aug 8, 2008.

Income Taxes

 

Income tax expense is based on pretax financial accounting income.  Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  We must then assess the likelihood that the resulting

 

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deferred tax asserts will be realized.  To the extent we believe that realization is not more likely than not, we establish a valuation allowance.  Significant estimates are required in determining our provision for income taxes, our deferred tax assets and liabilities, unrecognized tax benefits, and any valuation allowance to be recorded against our net deferred tax asset.  Some of these estimates are based on interpretations of existing tax laws or regulations.  We believe that our estimates are reasonable and that our reserves for income tax related uncertainties are adequate. Various internal and external factors may have favorable or unfavorable effects on our future effective tax rate.  These factors include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, changes in the valuation of deferred tax assets or liabilities, future level of research and development spending, nondeductible expenses, changes in overall levels and geographical mix of actual and forecast pretax earnings, and ultimate outcomes of income tax audits.

 

This excerpt taken from the AFFX 10-Q filed May 12, 2008.

Income Taxes

 

Income tax expense is based on pretax financial accounting income.  Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  We must then assess the likelihood that the resulting deferred tax asserts will be realized.  To the extent we believe that realization is not more likely than not, we establish a valuation allowance.  Significant estimates are required in determining our provision for income taxes, our deferred tax assets and liabilities, unrecognized tax benefits, and any valuation allowance to be recorded against our net deferred tax asset.  Some of these estimates are based on interpretations of existing tax laws or regulations.  We believe that our estimates are reasonable and that our reserves for income tax related uncertainties are adequate. Various internal and external factors may have favorable or unfavorable effects on our future effective tax rate.  These factors include, but are not limited to, changes in tax laws, regulations and /or rates, changing interpretations of existing tax laws or regulations, changes in the valuation of deferred tax assets or liabilities, future level of research and development spending, nondeductible expenses, changes in overall levels and geographical mix of pretax earnings, and ultimate outcomes of income tax audits.

 

These excerpts taken from the AFFX 10-K filed Feb 29, 2008.

INCOME TAXES

        Income tax expense is based on pre-tax financial accounting income. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. To the extent the Company believes that realization is not more likely than not, the Company establishes a valuation allowance. Significant estimates are required in determining the Company's provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance to be recorded against our net deferred tax asset. Some of these estimates are based on interpretations of existing tax laws or regulations. The Company believes that its estimates are reasonable and that its reserves for income tax related uncertainties are adequate. Various internal and external factors may have favorable or unfavorable effects on the Company's future effective tax rate. These factors include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, changes in the valuation of our deferred tax assets or liabilities, future levels of research and development spending, nondeductible expenses, changes in overall levels of characterization and geographical mix of pretax earnings (losses) and ultimate outcomes of income tax audits.

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AFFYMETRIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2007

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

INCOME TAXES



        Income tax expense is based on pre-tax financial accounting income. Under the liability method, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The
Company must then assess the likelihood that the resulting deferred tax assets will be realized. To the extent the Company believes that realization is not more likely than not, the Company
establishes a valuation allowance. Significant estimates are required in determining the Company's provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance to
be recorded against our net deferred tax asset. Some of these estimates are based on interpretations of existing tax laws or regulations. The Company believes that its estimates are reasonable and
that its reserves for income tax related uncertainties are adequate. Various internal and external factors may have favorable or unfavorable effects on the Company's future effective tax rate. These
factors include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, changes in the valuation of our deferred tax
assets or liabilities, future levels of research and development spending, nondeductible expenses, changes in overall levels of characterization and geographical mix of pretax earnings (losses) and
ultimate outcomes of income tax audits.



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AFFYMETRIX, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



DECEMBER 31, 2007



NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)




This excerpt taken from the AFFX 10-Q filed Nov 8, 2007.

Income Taxes

 

Income tax expense is based on pretax financial accounting income.  Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  We must then assess the likelihood that the resulting deferred tax assets will be realized.  To the extent we believe that realization is not more likely than not, we establish a valuation allowance.  Significant estimates are required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance to be recorded against our net deferred tax asset.  Some of these estimates are based on interpretations of existing tax laws or regulations.  We believe that our estimates are reasonable and that our reserves for income tax related uncertainties are adequate.  Various internal and external factors may have favorable or unfavorable effects on our future effective tax rate.  These factors include, but are not limited to, changes in tax laws, regulations and /or rates, changing interpretations of existing tax laws or regulations, changes in the valuation of deferred tax assets or liabilities, future level of research and development spending, nondeductible expenses, changes in overall levels and geographical mix of pretax earnings, and ultimate outcomes of income tax audits.

 

Beginning January 1, 2007, we apply FIN 48 in accounting for income taxes in accordance with SFAS 109.  Under FIN 48 a company recognizes the benefit from a tax position only if it is more-likely-than-not that the position would be sustained upon audit based solely on the technical merits of the tax position.  FIN 48 clarifies how a company would measure the income tax benefits from the tax positions that are recognized, provides guidance as to the timing of the derecognition of previously recognized tax benefits, and describes the methods for classifying and disclosing the liabilities within the financial statement for any unrecognized tax benefits.  FIN 48 also addresses when a company should record interest and penalties related to tax positions and how the interest and penalties may be classified within the income statement and presented in the balance sheet.

 

We evaluate the likelihood of sustaining tax positions and assess the benefit to be recognized from these positions using certain subjective assumptions.  The estimate of these key assumptions is based on historical information and judgment regarding audit experience, similar positions, as well as expert advice. As required we review our assumptions at each balance sheet date and, as a result, we may change our valuation assumptions as our experience changes.

 

Contingencies

 

We are subject to legal proceedings principally related to intellectual property matters. Based on the information available at the balance sheet dates, we assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses. If losses are probable and reasonably estimable, we will record a reserve in accordance

 

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with SFAS 5, Accounting for Contingencies. Any reserves recorded may change in the future due to new developments in each matter.

 

Accounting for Stock-Based Compensation

 

Beginning January 1, 2006, we account for employee stock-based compensation in accordance with SFAS 123R. Under the provisions of SFAS 123R, we estimate the fair value of our employee stock awards at the date of grant using the Black-Scholes option-pricing model, which requires the use of certain subjective assumptions. The most significant of these assumptions are our estimates of the expected term, volatility and forfeiture rates of the awards. The expected stock price volatility assumption was determined using a combination of historical and implied volatility of our common stock.  We determined that blended volatility is more reflective of market conditions and a better indicator of expected volatility than historical volatility. The estimate of these key assumptions is based on historical information and judgment regarding market factors and trends.  As required under the accounting rules, we review our valuation assumptions at each grant date and, as a result, we are likely to change our valuation assumptions used to value employee stock-based awards granted in future periods.

 

SFAS 123R requires that employee stock-based compensation costs be recognized over the requisite service period, or the vesting period, in a manner similar to all other forms of compensation paid to employees. Accordingly, in the first nine months of 2007, we recognized employee stock-based compensation of approximately $0.8 million in cost of product sales, approximately $1.6 million in research and development expense and approximately $5.2 million in selling, general and administrative expenses. We adopted SFAS 123R on a modified prospective basis. As of September 30, 2007, approximately $26.8 million of total unrecognized stock-based compensation expense related to non-vested awards is expected to be to be recognized over the respective vesting terms of each award through June 2011. The weighted average term of the unrecognized stock-based compensation expense is 2.3 years.

 

During the nine months ended September 30, 2006 under SFAS 123R we recognized employee stock-based compensation of $1.1 million in cost of product sales, $3.0 million in research and development expense and $8.4 million in sales, general and administrative expenses, which includes approximately $1.1 million related to the modification of an executive officer’s stock option grant to increase the associated exercise period.

 

Restructuring

 

We have recently engaged in, and may continue to engage in, restructuring actions, which require management to utilize significant estimates related to expenses for severance and other employee separation costs, lease cancellation, realizable values of assets that may become duplicative or obsolete, and other exit costs. If the actual amounts differ from our estimates, the amount of the restructuring charges could be materially impacted. For a full description of our restructuring actions, see Note 3 to the Condensed Consolidated Financial Statements in Item 1.

 

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This excerpt taken from the AFFX 10-Q filed Aug 9, 2007.

Income Taxes

Income tax expense is based on pretax financial accounting income.  Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  We must then assess the likelihood that the resulting deferred tax assets will be realized.  To the extent we believe that realization is not more likely than not, we establish a valuation allowance.  Significant estimates are required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance to be recorded against our net deferred tax asset.  Some of these estimates are based on interpretations of existing tax laws or regulations.  We believe that our estimates are reasonable and that our reserves for income tax related uncertainties are adequate.  Various internal and external factors may have favorable or unfavorable effects on our future effective tax rate.  These factors include, but are not limited to, changes in tax laws, regulations and /or rates, changing interpretations of existing tax laws or regulations, changes in the valuation of deferred tax assets or liabilities, future level of research and development spending, nondeductible expenses, changes in overall levels and geographical mix of pretax earnings, and ultimate outcomes of income tax audits.

Beginning January 1, 2007, we apply FIN 48 in accounting for income taxes in accordance with SFAS 109.  Under FIN 48 a company recognizes the benefit from a tax position only if it is more-likely-than-not that the position would be sustained upon audit based solely on the technical merits of the tax position.  FIN 48 clarifies how a company would measure the income tax benefits from the tax positions that are recognized, provides guidance as to the timing of the derecognition of previously recognized tax benefits, and describes the methods for classifying and disclosing the liabilities within the financial statement for any unrecognized tax benefits.  FIN 48 also addresses when a company should record interest and penalties related to tax positions and how the interest and penalties may be classified within the income statement and presented in the balance sheet.

We evaluate the likelihood of sustaining tax positions and assess the benefit to be recognized from these positions using certain subjective assumptions.  The estimate of these key assumptions is based on historical information and judgment regarding audit experience, similar positions, as well as expert advice. As required we review our assumptions at each balance sheet date and, as a result, we may change our valuation assumptions as our experience changes.

Contingencies

We are subject to legal proceedings principally related to intellectual property matters. Based on the information available at the balance sheet dates, we assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses. If losses are probable and reasonably estimable, we will record a reserve in accordance with SFAS 5, Accounting for Contingencies. Any reserves recorded may change in the future due to new developments in each matter.

Accounting for Stock-Based Compensation

Beginning January 1, 2006, we account for employee stock-based compensation in accordance with SFAS 123R. Under the provisions of SFAS 123R, we estimate the fair value of our employee stock awards at the date of grant using the Black-Scholes option-pricing model, which requires the use of certain subjective assumptions. The most significant of these assumptions are our estimates of the expected term, volatility and forfeiture rates of the awards. The expected stock price volatility assumption was determined using a combination of historical and implied volatility of our common stock.  We determined that blended volatility is more reflective of market conditions and a better indicator of expected volatility than historical volatility. The estimate of these key assumptions is based on historical information and judgment regarding market factors and trends.  As required under the accounting rules, we review our valuation assumptions at each grant date and, as a result, we are likely to change our valuation assumptions used to value employee stock-based awards granted in future periods.

SFAS 123R requires that employee stock-based compensation costs be recognized over the requisite service period, or the vesting period, in a manner similar to all other forms of compensation paid to employees. Accordingly, in the first six months of 2007, we recognized employee stock-based compensation of approximately $0.5 million in cost of product sales, approximately $1.2 million in research and development expense and approximately $2.9 million in selling, general and administrative expenses.  We adopted SFAS 123R on a modified prospective basis. As of June 30, 2007, approximately $28.8 million of total unrecognized stock-based compensation expense related to non-vested awards is expected to be to be recognized over the respective vesting terms of each award through June 2011. The weighted average term of the unrecognized

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stock-based compensation expense is 2.3 years.

During the six months ended June 30, 2006 under SFAS 123R we recognized employee stock-based compensation of $0.7 million in cost of product sales, $2.1 million in research and development expense and $6.1 million in sales, general and administrative expenses, which includes approximately $1.1 million related to the modification of an executive officer’s stock option grant to increase the associated exercise period.

Restructuring

 We have recently engaged in, and may continue to engage in, restructuring actions, which require management to utilize significant estimates related to expenses for severance and other employee separation costs, lease cancellation, realizable values of assets that may become duplicative or obsolete, and other exit costs.  If the actual amounts differ from our estimates, the amount of the restructuring charges could be materially impacted.  For a full description of our restructuring actions, see Note 3 to the Condensed Consolidated Financial Statements in Item 1.

This excerpt taken from the AFFX 10-K filed Jul 30, 2007.

INCOME TAXES

Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Significant estimates and management judgment are required in determining the provision for income taxes. Some of these estimates are based on interpretations of existing tax laws or regulations. The Company believes that their estimates are reasonable and that their reserves for income tax related uncertainties are adequate. Deferred tax assets are assessed for the likelihood that they are recoverable. The assessment considers recent historic results, future market growth, forecasted earnings, future taxable income, and the mix of earnings in jurisdictions in which the Company operates. To the extent management believes that the recovery is not likely, a valuation allowance is recorded to reduce the deferred tax assets to the amount that the Company believes is more likely than not to be realized. Future changes in tax laws, regulations and rates, changes in the interpretations of existing tax laws or regulations, changes in overall levels and mix of income before tax, and ultimate outcomes of income tax audits could have an impact on the Company’s future effective tax rate.

This excerpt taken from the AFFX 10-Q filed May 10, 2007.

Income Taxes

Income tax expense is based on pretax financial accounting income.  Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  We must then assess the likelihood that the resulting deferred tax asserts will be realized.  To the extent we believe that realization is not more likely than not, we establish a valuation allowance.  Significant estimates are required in determining our provision for income

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taxes, our deferred tax assets and liabilities, and any valuation allowance to be recorded against our net deferred tax asset.  Some of these estimates are based on interpretations of existing tax laws or regulations.  We believe that our estimates are reasonable and that our reserves for income tax related uncertainties are adequate.  Various internal and external factors may have favorable or unfavorable effects on our future effective tax rate.  These factors include, but are not limited to, changes in tax laws, regulations and /or rates, changing interpretations of existing tax laws or regulations, changes in the valuation of deferred tax assets or liabilities, future level of research and development spending, nondeductible expenses, changes in overall levels and geographical mix of pretax earnings, and ultimate outcomes of income tax audits.

Beginning January 1, 2007, we apply FIN 48 in accounting for income taxes in accordance with SFAS 109.  Under FIN 48 a company recognizes the benefit from a tax position only if it is more-likely-than-not that the position would be sustained upon audit based solely on the technical merits of the tax position.  FIN 48 clarifies how a company would measure the income tax benefits from the tax positions that are recognized, provides guidance as to the timing of the derecognition of previously recognized tax benefits, and describes the methods for classifying and disclosing the liabilities within the financial statement for any unrecognized tax benefits.  FIN 48 also addresses when a company should record interest and penalties related to tax positions and how the interest and penalties may be classified within the income statement and presented in the balance sheet.

We evaluate the likelihood of sustaining tax positions and assess the benefit to be recognized from these positions using certain subjective assumptions.  The estimate of these key assumptions is based on historical information and judgment regarding audit experience, similar positions, as well as expert advice. As required we review our assumptions at each balance sheet date and, as a result, we may change our valuation assumptions as our experience changes.

This excerpt taken from the AFFX 10-K filed Mar 1, 2007.

INCOME TAXES

Income tax expense is based on pretax financial accounting income. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. To the extent the Company believes that realization is not more likely than not, the Company establishes a valuation allowance. Significant estimates are required in determining the Company’s provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance to be recorded against our net deferred tax asset. Some of these estimates are based on interpretations of existing tax laws or regulations. The Company believes that its estimates are reasonable and that its reserves for income tax related uncertainties are adequate. Various internal and external factors may have favorable or unfavorable effects on the Company’s future effective tax rate. These factors include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, changes in the valuation of our deferred tax assets or liabilities, future levels of research and development spending, nondeductible expenses, changes in overall levels and geographical mix of pretax earnings (losses) and ultimate outcomes of income tax audits.

This excerpt taken from the AFFX 10-Q filed Nov 9, 2006.

NOTE 12—INCOME TAXES

For the nine months ended September 30, 2006, the tax provision principally consists of federal, state and foreign taxes partially offset by a $1.3 million reduction in an income tax reserve based on the conclusion of an audit of a foreign tax authority in the first quarter of 2006 and by a $1.8 million reduction in an income tax reserve related to U.S. and foreign transfer pricing issues in the third quarter of 2006. Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”) provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Additionally, SFAS 123R prohibits the recognition of a deferred tax asset related to the excess tax benefit resulting from the exercise of employee stock options that has not been realized. Based upon the weight of available evidence, which included an analysis of projected future book and taxable income, as of September 30, 2006, the Company has provided for a valuation allowance of $75.2 million.

This excerpt taken from the AFFX 10-Q filed Aug 30, 2006.

NOTE 11—INCOME TAXES

For the six months ended June 30, 2006, the tax provision principally consists of federal, state and foreign taxes partially offset by a $1.3 million reduction in an income tax reserve based on the conclusion of an audit of a foreign tax authority in the first quarter of 2006. Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”) provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Additionally, SFAS 123R prohibits the recognition of a deferred tax asset related to the excess tax benefit resulting from the exercise of employee stock options that has not been realized. Based upon the weight of available evidence, which included an analysis of projected future book and taxable income, as of June 30, 2006, the Company has provided for a valuation allowance of $76.6 million.

This excerpt taken from the AFFX 10-Q filed Aug 30, 2006.

NOTE 11—INCOME TAXES

For the three months ended March 31, 2006, the tax benefit principally consists of a $1.3 million reduction in a tax reserve based upon the completion of a foreign tax authority audit, partially offset by the Company’s tax provisions for federal, state and foreign taxes. Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”) provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Additionally, SFAS 123R prohibits the recognition of a deferred tax asset related to the excess tax benefit resulting from the exercise of employee stock options that has not been realized. Based upon the weight of available evidence, which included an analysis of projected future book and taxable income, as of March 31, 2006, the Company has provided for a valuation allowance of $76.6 million.

This excerpt taken from the AFFX 10-K filed Aug 30, 2006.

INCOME TAXES

Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Significant estimates and management judgment are required in determining the provision for income taxes. Some of these estimates are based on interpretations of existing tax laws or regulations. The Company believes that their estimates are reasonable and that their reserves for income tax related uncertainties are adequate. Deferred tax assets are assessed for the likelihood that they are recoverable. The assessment considers recent historic results, future market growth, forecasted earnings, future taxable income, and the mix of earnings in jurisdictions in which the Company operates. To the extent management believes that the recovery is not likely, a valuation allowance is recorded to reduce the deferred tax assets to the amount that the Company believes is more likely than not to be realized. Future changes in tax laws, regulations and rates, changes in the interpretations of existing tax laws or regulations, changes in overall levels and mix of income before tax, and ultimate outcomes of income tax audits could have an impact on the Company’s future effective tax rate.

This excerpt taken from the AFFX 10-Q filed May 10, 2006.

NOTE 10—INCOME TAXES

 

For the three months ended March 31, 2006, the tax benefit principally consists of a $1.3 million reduction in a tax reserve based upon the completion of a foreign tax authority audit, partially offset by the Company’s tax provisions for federal, state and foreign taxes. Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”) provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Additionally, SFAS 123R prohibits the recognition of a deferred tax asset related to the excess tax benefit resulting from the exercise of employee stock options that has not been realized. Based upon the weight of available evidence, which included an analysis of projected future book and taxable income, as of March 31, 2006, the Company has provided for a valuation allowance of $82.3 million.

 

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This excerpt taken from the AFFX 10-K filed Mar 9, 2006.
INCOME TAXES

Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Significant estimates and management judgment are required in determining the provision for income taxes. Some of these estimates are based on interpretations of existing tax laws or regulations. The Company believes that their estimates are reasonable and that their reserves for income tax related uncertainties are adequate. Deferred tax assets are assessed for the likelihood that they are recoverable. The assessment considers recent historic results, future market growth, forecasted earnings, future taxable income, and the mix of earnings in jurisdictions in which the Company operates. To the extent management believes that the recovery is not likely, a valuation allowance is recorded to reduce the deferred tax assets to the amount that the Company believes is more likely than not to be realized. Future changes in tax laws, regulations and rates, changes in the interpretations of existing tax laws or regulations, changes in overall levels and mix of income before tax, and ultimate outcomes of income tax audits could have an impact on the Company’s future effective tax rate.

This excerpt taken from the AFFX 10-Q filed Nov 9, 2005.

NOTE 10—INCOME TAXES

 

The tax provision principally consists of taxes currently payable on the taxable profits generated by the Company’s foreign operations, and federal and state taxes offset by the utilization of net operating losses.  The increase of 151% or $0.9 million in the third quarter and 160% or $3.6 million in the first nine months of 2005 as compared to the same periods in 2004, is primarily due to an increase in pretax income of approximately $15.7 million in the nine month period ended September 30, 2005 verses the nine month period ended September 30, 2004.  Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”) provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Based upon the weight of available evidence, which includes the Company’s historical operating performance and previously reported net losses, at September 30, 2005, the Company continues to maintain a full valuation allowance against its remaining net deferred tax assets as they are not yet considered realizable.

 

This excerpt taken from the AFFX 10-Q filed Aug 9, 2005.

NOTE 10—INCOME TAXES

 

The tax provision principally consists of taxes currently payable on the taxable profits generated by the Company’s foreign operations, and federal and state taxes offset by the utilization of net operating losses.  The increase of 82% or $0.6 million in the second quarter and 164% or $2.6 million in the first six months of 2005 as compared to the same periods in 2004, is primarily due to an increase in pretax income of approximately $21.5 million in the six month period ended June 30, 2005 verses the six month period ended June 30, 2004.  Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”) provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Based upon the weight of available evidence, which includes the Company’s historical operating performance and previously reported net losses, at June 30, 2005, the Company continues to maintain a full valuation allowance against its net deferred tax assets as they are not yet realizable.

 

This excerpt taken from the AFFX 10-Q filed May 10, 2005.

NOTE 10—INCOME TAXES

 

The tax provision principally consists of taxes currently payable on the taxable profits generated by the Company’s foreign operations, federal alternative minimum tax, and state taxes.  The increase of 236% or $2.0 million for the first quarter of 2005 as compared to the same period in 2004, is primarily due to having pretax income in the first quarter of 2005 versus a pretax loss in the first quarter of 2004.  Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”) provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Based upon the weight of available evidence, which includes our historical operating performance and previously reported net losses, at March 31, 2005, the Company continues to maintain a full valuation allowance against its net deferred tax assets as they are not yet realizable.

 

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INCOME TAXES

        Under the asset and liability method, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period of enactment.

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