2K Sports 2008 Annual Report Download - page 97

At October 31, 2008, we had a U.S. federal net operating loss carryforward totaling $173,501, which
$79,959 is subject to limitation by the Internal Revenue Service, and that will begin to expire in fiscal 2026
and foreign net operating losses of $17,777 that may be carried forward indefinitely.
The total amount of undistributed earnings of foreign subsidiaries was approximately $229,800 and
$152,000 for the years ended October 31, 2008 and 2007, respectively. It is our intention to reinvest
undistributed earnings of our foreign subsidiaries and thereby indefinitely postpone their remittance.
Accordingly, no provision has been made for foreign withholding taxes or United States income taxes
which may become payable if undistributed earnings of foreign subsidiaries are paid as dividends.
We are regularly audited by domestic and foreign taxing authorities. Audits may result in tax assessments
in excess of amounts claimed and the payment of additional taxes. We believe that our tax return positions
comply with applicable tax law and that we have adequately provided for reasonably foreseeable
assessments of additional taxes. Additionally, we believe that any assessments in excess of the amounts
provided for will not have a material adverse impact on the consolidated financial statements.
On November 1, 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes, an Interpretation of FASB Statement No. 109 (FIN 48). The cumulative effect of adopting FIN 48 was
$1,075 and was recorded to the opening balance of retained earnings in our consolidated balance sheet.
A year-over-year reconciliation of our liability for gross uncertain tax positions is as follows:
2008
Balance November 1, 2007 $18,960
Additions:
Current year tax positions 537
Prior year tax positions 2,256
Reduction of prior year tax positions (2,759)
Settlements (512)
Lapse of statue of limitations (70)
Balance at October 31, 2008 $18,412
We recognize interest and penalties related to uncertain tax positions in the provision for income taxes in
our consolidated statement of operations. The gross amount of interest and penalties accrued as of
October 31, 2008 was approximately $7,987.
Approximately $26,399 of the consolidated worldwide liability for unrecognized tax benefits recorded in
our balance sheet would affect our effective tax rate if recognized.
U.S. federal and state taxing authorities are currently examining our income tax returns for years from
fiscal 2000 through fiscal 2006. In addition, tax authorities in certain non-U.S. jurisdictions are examining
our returns affecting unrecognized tax benefits. It is possible that tax examinations will be settled prior to
October 31, 2009. If any of these tax audit settlements do occur within that period, the company would
make any necessary adjustments to the accrual for unrecognized tax benefits. Until formal resolutions are
reached between the company and the tax authorities, the determination of a possible audit settlement
range with respect to the impact on unrecognized tax benefits is not practicable. We are no longer subject
to audit for U.S. federal and state income tax returns for periods prior to fiscal 2000. With some
exceptions, we are generally no longer subject to tax examinations in non-U.S. jurisdictions for years prior
to fiscal 2001.
We believe that we have provided for any reasonably foreseeable outcomes related to our tax audits and
that any settlement will not have a material adverse effect on our consolidated financial position, cash
flows or results of operations. However, there can be no assurances as to the possible outcomes.
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