Taxes and losses

We are discussing deferred taxes this week and a company that has a number of interesting issues is Amazon.com The company reported its 2004 results this week and interestingly it is starting to finally use its loss carryforwards from all of the losses it generated. I found it interesting that the Wall Street Journal termed the recognition of the tax carryforward a "gain" from tax benefits. Here is a cut from Amazon's press release:

Net income was $347 million in the fourth quarter, or $0.82 per diluted share, compared with net income of $73 million, or $0.17 per diluted share, in fourth quarter 2003. Pro forma net income in the fourth quarter was $394 million, or $0.93 per diluted share, compared with $125 million, or $0.29 per diluted share, in fourth quarter 2003. Excluding the benefit from realizing a $244 million deferred tax asset related primarily to net operating loss carryforwards attributable to continuing operations, fourth quarter pro forma net income would have been $149 million, or $0.35 per diluted share.

One interesting item that can be brought out in class with Amazon is that the company only reports a deferred tax asset of $81,388,000 at Dec. 31, 2004 even though the net operating loss carryforwards are much greater.