2K Sports 2009 Annual Report Download - page 102

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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.
As of October 31, 2009, we had gross unrecognized tax benefits, including interest and penalties, of
$24,637, all of which would affect our effective tax rate if realized.
The aggregate changes to the liability for gross uncertain tax positions, excluding interest and penalties,
were as follows:
Years Ended October 31,
2009 2008
Balance November 1, $18,412 $18,960
Additions:
Current year tax positions 5,630 537
Prior year tax positions 3,316 2,256
Reduction of prior year tax positions (4,013) (2,759)
Settlements (4,762) (512)
Lapse of statue of limitations —(70)
Other, net (160) —
Balance at October 31, $18,423 $18,412
We recognize interest and penalties related to uncertain tax positions in the provision for income taxes in
our consolidated statement of operations. For the year ended October 31, 2009, we recognized a decrease
in interest and penalties of approximately $1,773. The gross amount of interest and penalties accrued as of
October 31, 2009 was approximately $6,214.
U.S. federal taxing authorities have completed examinations of our income tax returns for years through
fiscal 2002. Certain US state taxing authorities are currently examining our income tax returns from fiscal
years 2004 through fiscal 2006. In addition, tax authorities in certain non-U.S. jurisdictions are currently
examining our tax returns. It is possible that tax examinations will be settled prior to October 31, 2010.
Based on the progress and possible settlement of certain audits, we believe it is reasonably possible that
approximately $11,000 of our gross unrecognized tax benefits could become payable during the next
12 months. We generally are no longer subject to audit for U.S. federal income tax returns for periods prior
to fiscal 2003 and state income tax returns for periods prior to 2004. With some exceptions, we are
generally no longer subject to income tax examinations in non-U.S. jurisdictions for years prior to fiscal
2005.
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.
14. STOCK-BASED COMPENSATION
Our stock-based compensation plans are broad-based, long-term retention programs intended to attract
and retain talented employees and align stockholder and employee interests. For similar reasons, we also
granted non-employee equity awards, which are subject to variable accounting, to ZelnickMedia in
connection with their contract to provide executive management services to us. We began replacing stock
option awards with restricted stock awards in 2007. We issue shares to employees on the date the restricted
stock is granted and therefore shares granted have voting rights, participate in dividends and are
considered issued and outstanding.
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