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This excerpt taken from the WDC 10-K filed Aug 20, 2008. Deferred
Taxes
Temporary differences and carryforwards, which give rise to a
significant portion of deferred tax assets and liabilities as of
June 27, 2008 and June 29, 2007 were as follows (in
millions):
In addition to the deferred tax assets presented above, the
Company had additional NOL and credit benefits related to
stock-based compensation deductions of approximately
$43 million and $106 million at June 27, 2008 and
June 29, 2007, respectively, including $11 million as
of June 27, 2008 related to the Acquisition. The deductions
related to stock based compensation resulted in a
$19 million tax benefit and the use of NOL and credit
carryforwards related to stock
Table of Contents
WESTERN
DIGITAL CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
based compensation resulted in a $70 million tax benefit
during the year ended June 27, 2008. In accordance with the
provisions of SFAS 123(R), shareholders equity was
increased by $89 million during 2008 for these benefits.
Beginning in the year ended June 27, 2008, deferred tax
assets are presented before any reduction for liabilities
relating to unrecognized tax benefits. The increase to the
deferred tax assets for the fiscal year ended June 27, 2008
relates primarily to 1) the acquisition of Komag and its
net deferred tax assets of $92 million and 2) the
reclassification of $50 million of liabilities for
unrecognized tax benefits that were previously recorded net in
deferred tax assets.
As of the end of fiscal 2007, the Company determined that it is
more likely than not that its net deferred tax assets will be
realized. Accordingly, the Company eliminated its remaining
valuation allowance which resulted in the recognition of
additional net deferred tax assets of $125 million. The
realization of the deferred tax assets is primarily dependent on
the Company’s ability to generate sufficient earnings in
certain jurisdictions in future years. The Company released the
remainder of the valuation allowance for its deferred tax assets
based on the weight of available evidence including the history
of cumulative pretax income and the increased likelihood of the
Company’s ability to generate profits in the future. The
amount of deferred tax assets considered realizable may increase
or decrease in subsequent periods based on fluctuating industry
or Company conditions.
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