Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Schedule of Components of Income Tax Expense (Benefit)

The provision for income taxes consists of the following (in millions):

	Year Ended December 31,
	2010			2011			2012
Current:
Federal	$	1,657		$	1,724		$	2,342
State		458			274			171
Foreign		167			248			358
Total		2,282			2,246			2,871
Deferred:
Federal		(25	)		452			(328	)
State		47			(109	)		(19	)
Foreign		(13	)		(0	)		74
Total		9			343			(273	)
Provision for income taxes	$	2,291		$	2,589		$	2,598

Schedule of Effective Income Tax Rate Reconciliation

The reconciliation of federal statutory income tax rate to our effective income tax rate is as follows (in millions):

	Year ended December 31,
	2010			2011			2012
Expected provision at federal statutory tax rate (35%)	$	3,779		$	4,314		$	4,685
State taxes, net of federal benefit		322			122			99
Stock-based compensation expense		79			105			52
Change in valuation allowance		(34	)		27			1,921
Foreign rate differential		(1,769	)		(2,001	)		(2,200	)
Federal research credit		(84	)		(140	)		0
Tax exempt interest		(12	)		(10	)		(7	)
Non-deductible legal settlement		0			175			0
Basis difference in investment in Home business		0			0			(1,960	)
Other permanent differences		10			(3	)		8
Provision for income taxes	$	2,291		$	2,589		$	2,598

Schedule of Deferred Tax Assets and Liabilities

Significant components of our deferred tax assets and liabilities are as follows (in millions):

	As of December 31,
	2011			2012
Deferred tax assets:
Stock-based compensation expense	$	288		$	311
State taxes		138			184
Capital loss carryforward		285			236
Settlement with the Authors Guild and AAP		35			28
Vacation accruals		52			67
Deferred rent		43			50
Accruals and reserves not currently deductible		268			688
Acquired net operating losses		156			505
Tax credit		55			274
Basis difference in investment in Home business		0			2,043
Other		11			128
Total deferred tax assets		1,331			4,514
Valuation allowance		(333	)		(2,629	)
Total deferred tax assets net of valuation allowance		998			1,885
Deferred tax liabilities:
Depreciation and amortization		(479	)		(761	)
Identified intangibles		(398	)		(1,496	)
Unrealized gains on investments and other		(90	)		(105	)
Other prepaids		(70	)		(118	)
Other		(33	)		(133	)
Total deferred tax liabilities		(1,070	)		(2,613	)
Net deferred tax liabilities	$	(72	)	$	(728	)

Summary of Income Tax Contingencies

The following table summarizes the activity related to our gross unrecognized tax benefits from January 1, 2010 to December 31, 2012 (in millions):

Balance as of January 1, 2010	$	1,188
Increases related to prior year tax positions		37
Decreases related to prior year tax positions		(197	)
Decreases related to settlement with tax authorities		(47	)
Decreases as a result of a lapse of applicable statute of limitation		(97	)
Increases related to current year tax positions		256
Balance as of December 31, 2010		1,140
Increases related to prior year tax positions		77
Decreases related to prior year tax positions		(9	)
Increases related to current year tax positions		361
Decreases related to settlement with tax authorities		(5	)
Balance as of December 31, 2011		1,564
Increases related to prior year tax positions		43
Decreases related to prior year tax positions		(40	)
Decreases related to settlement with tax authorities		(62	)
Increases related to acquisition		17
Increases related to current year tax positions		411
Balance as of December 31, 2012		1,933