Operating loss carryforwards, decrease

[Table of Contents](#i3d0ebbc4e2a2420f98ed7e6fe698936a_7) HASBRO, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements — (Continued)  
The components of deferred income tax expense (benefit) arise from various temporary differences and relate to items included in the consolidated statements of operations as well as items recognized in other comprehensive earnings. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 26, 2021 and December 27, 2020 are:

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |
| (In millions) | 2021 |  | 2020 |
| Deferred tax assets: |  |  |  |
| Accounts receivable | $ | 30.8  |  |  | 32.7  |  |
| Inventories | 14.1  |  |  | 14.0  |  |
| Loss and credit carryforwards | 175.7  |  |  | 221.6  |  |
| Operating leases | 17.8  |  |  | 23.1  |  |
| Operating expenses | 23.5  |  |  | 32.9  |  |
| Pension | 16.3  |  |  | 16.6  |  |
| Other compensation | 37.3  |  |  | 33.7  |  |
| Postretirement benefits | 8.5  |  |  | 7.9  |  |
| Interest rate hedge | 4.7  |  |  | 5.0  |  |
| Tax sharing agreement | 1.5  |  |  | 2.2  |  |
| Deferred revenue | 4.0  |  |  | 8.3  |  |
| Other | 13.5  |  |  | 12.0  |  |
| Gross deferred tax assets | 347.7  |  |  | 410.0  |  |
| Deferred tax liabilities: |  |  |  |
| Depreciation and amortization of long-lived assets | 144.5  |  |  | 181.2  |  |
| Equity method investment | 6.7  |  |  | 21.3  |  |
| Operating leases | 15.1  |  |  | 20.1  |  |
| Foreign exchange | 13.7  |  |  | 7.3  |  |
| Prepaid expenses | 3.5  |  |  | 3.6  |  |
| Other | 8.8  |  |  | 19.5  |  |
| Gross deferred tax liabilities | 192.3  |  |  | 253.0  |  |
| Valuation allowance | (171.2) |  |  | (174.2) |  |
| Net deferred income taxes | $ | (15.8) |  |  | (17.2) |  |

Certain reclassifications have been made to prior year presentation to conform to current year presentation.The most significant amount of the loss and credit carryforwards relate to tax attributes of the acquired eOne entities that historically operated at losses in certain jurisdictions. At December 26, 2021, the Company has loss and credit carryforwards of $175.7 million, which is a decrease of $45.9 million from $221.6 million at December 27, 2020. Loss and credit carryforwards as of December 26, 2021 relate primarily to the U.S. and Canada. The Canadian loss carryforwards expire at various dates from 2031 to 2041. Some U.S. federal and state loss and credit carryforwards expire at various dates throughout 2022 while others have an indefinite carryforward period. The recoverability of these future tax deductions and credits is evaluated by assessing the adequacy of future expected taxable income from all sources, including taxable income in prior carryback years, reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. To the extent the Company does not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is generally established. To the extent that a valuation allowance was established and it is subsequently determined that it is more likely than not that the deferred tax assets will be recovered, the change in the valuation allowance is recognized in the consolidated statements of income.The Company has a valuation allowance for certain net deferred tax assets at December 26, 2021 of $171.2 million, which is a decrease of $3.0 million from $174.2 million at December 27, 2020. The valuation allowance pertains to certain U.S. state and international loss and credit carryforwards, some of which have no expiration and 106
