RealNetworks (RNWK)

 

During the years ended December 31, 2008, 2007, and 2006, we recognized income tax expense of $25.8 million, $27.5 million, and $82.5 million, respectively, related to U.S. and foreign income taxes. The decrease of $1.7 million in tax expense from the year ended December 31, 2007 to 2008 was primarily due to the impairments of long-lived assets, deferred costs and prepaid royalties incurred in 2008 as well as the change in income generated from the Microsoft settlement offset by an increase in tax expense due to the change in the valuation allowance. The decrease of $55.0 million in tax expense from the year ended December 31, 2006 to 2007 was primarily due to the change in income generated from the Microsoft settlement. We assess the likelihood that our deferred tax assets will be recovered. In making this assessment, many factors are considered including the current economic climate, our expectations of future taxable income, our ability to project such income, and the appreciation of our investments and other assets. As of December 31, 2008, we have a valuation allowance of $91.0 million. The net change in valuation allowance since December 31, 2007 was $51.2 million primarily due to the current economic environment in which the Company is currently not certain about its ability to recognize deferred tax assets.

 

 

During the years ended December 31, 2008, 2007, and 2006,
we recognized income tax expense of $25.8 million,
$27.5 million, and $82.5 million, respectively,
related to U.S. and foreign income taxes. The decrease of
$1.7 million in tax expense from the year ended
December 31, 2007 to 2008 was primarily due to the
impairments of long-lived assets, deferred costs and prepaid
royalties incurred in 2008 as well as the change in income
generated from the Microsoft settlement offset by an increase in
tax expense due to the change in the valuation allowance. The
decrease of $55.0 million in tax expense from the year
ended December 31, 2006 to 2007 was primarily due to the
change in income generated from the Microsoft settlement. We
assess the likelihood that our deferred tax assets will be
recovered. In making this assessment, many factors are
considered including the current economic climate, our
expectations of future taxable income, our ability to project
such income, and the appreciation of our investments and other
assets. As of December 31, 2008, we have a valuation
allowance of $91.0 million. The net change in valuation
allowance since December 31, 2007 was $51.2 million
primarily due to the current economic environment in which the
Company is currently not certain about its ability to recognize
deferred tax assets.

 

 

During the years ended December 31, 2007, 2006, and 2005, we recognized income tax expense of $27.5 million, $82.5 million, and $117.2 million, respectively, related to U.S. and foreign income taxes. We must assess the likelihood that our deferred tax assets will be recovered from future taxable income. In making this assessment, all available evidence must be considered including the current economic climate, our expectations of future taxable income, our ability to project such income, and the appreciation of our investments and other assets. As of December 31, 2007, we continue to have a valuation allowance of $39.7 million relating primarily to net operating losses that are restricted under Internal Revenue Code Section 382 that may expire unused, losses not yet realized for tax purposes on certain equity investments, and foreign losses which may not be utilized. As of December 31, 2006, we had a valuation allowance of $35.2 million relating primarily to net operating losses that are restricted under Internal Revenue Code Section 382, and losses not yet realized for tax purposes on certain equity investments.

 

 

During the years ended December 31, 2007, 2006, and 2005,
we recognized income tax expense of $27.5 million,
$82.5 million, and $117.2 million, respectively,
related to U.S. and foreign income taxes. We must assess
the likelihood that our deferred tax assets will be recovered
from future taxable income. In making this assessment, all
available evidence must be considered including the current
economic climate, our expectations of future taxable income, our
ability to project such income, and the appreciation of our
investments and other assets. As of December 31, 2007, we
continue to have a valuation allowance of $39.7 million
relating primarily to net operating losses that are restricted
under Internal Revenue Code Section 382 that may expire
unused, losses not yet realized for tax purposes on certain
equity investments, and foreign losses which may not be
utilized. As of December 31, 2006, we had a valuation
allowance of $35.2 million relating primarily to net
operating losses that are restricted under Internal Revenue Code
Section 382, and losses not yet realized for tax purposes
on certain equity investments.

 

 

During the years ended December 31, 2006, 2005, and 2004, we recognized income tax expense of $82.5 million, $117.2 million, and $522,000, respectively, related to U.S. and foreign income taxes. We must assess the likelihood that our deferred tax assets will be recovered from future taxable income. In making this assessment, all available evidence must be considered including the current economic climate, our expectations of future taxable income and our ability to project such income and the appreciation of our investments and other assets. As of December 31, 2006, we continue to have a valuation allowance of $35.2 million relating primarily to net operating losses that are restricted under Internal Revenue Code Section 382 that may expire unused, and losses not yet realized for tax purposes on certain equity investments. As of December 31, 2005, we had a valuation allowance of $36.3 million relating primarily to net operating losses that are restricted under Internal Revenue Code Section 382, and losses not yet realized for tax purposes on certain equity investments.

 

As of December 31, 2006, we had not made a final determination to maintain WiderThan Americas, Inc., currently a wholly-owned subsidiary of WiderThan, as a direct subsidiary of WiderThan or as a direct subsidiary of RealNetworks, Inc. The determination of the final structure may impact the amount of deferred tax liability and goodwill, if the decision is made within a reasonable time from the date of acquisition. In general, if the decision is made after one year following the date of acquisition it may impact our income tax expense.