AMD 2011 Annual Report Download - page 103

The Company has made no provision for U.S. income taxes on approximately $414 million of cumulative
undistributed earnings of certain foreign subsidiaries through December 31, 2011 because it is the Company’s
intention to permanently reinvest such earnings. If such earnings were distributed, the Company would incur
additional income taxes of approximately $141 million (after an adjustment for foreign tax credits). These
additional income taxes may not result in income tax expense or a cash payment to the Internal Revenue Service,
but may result in the utilization of deferred tax assets that are currently subject to a valuation allowance.
The Company’s operations in Singapore and Malaysia currently operate under tax holidays, which will
expire in whole or in part at various dates through 2014. Certain of the tax holidays may be extended if specific
conditions are met. The net impact of these tax holidays was to increase the Company’s net income by $9 million
and $7 million, in 2011 and 2010, respectively (less than $.01 per share, diluted). Due to losses, the tax holidays
did not impact the Company’s net income in 2009.
A reconciliation of the gross unrecognized tax benefits is as follows:
2011 2010 2009
(In millions)
Balance at beginning of year ...................................... $ 42 $166 $180
Increases for tax positions taken in prior years ........................ 28 — 11
Decreases for tax positions taken in prior years ....................... (4) (8) (18)
Increases for tax positions taken in the current year .................... 8 7 6
Decreases for settlements with taxing authorities ...................... (5) (119) (8)
Decreases for lapsing of the statute of limitations ...................... — (4) (5)
Balance at end of year ........................................... $ 69 $ 42 $166
The amount of unrecognized tax benefits that would impact the effective tax rate was $4 million, $8 million,
and $11 million as of December 31, 2011, December 25, 2010, and December 26, 2009, respectively. As of
December 31, 2011, the Company had $2 million of accrued interest and no accrued penalties related to
unrecognized tax benefits. As of December 25, 2010, the Company had accrued interest and penalties related to
unrecognized tax benefits of $10 million and $1 million, respectively. As of December 26, 2009, the Company
had accrued interest and penalties related to unrecognized tax benefits of $16 million and $5 million,
respectively. The Company recognizes potential accrued interest and penalties to unrecognized tax benefits as
interest expense and income tax expense, respectively.
The Company recorded a reduction of interest expense of $2 million and a decrease of $1 million of penalty
expense in its consolidated statement of operations in 2011. The Company recorded a reduction of interest expense of
$6 million and a decrease of $4 million of penalty expense in its consolidated statement of operations in 2010. The
Company recorded net interest expense of $2 million and a decrease of $24 million of penalty expense in its
consolidated statement of operations in 2009. During the 12 months beginning January 1, 2012, the Company expects
to reduce its unrecognized tax benefits by approximately $4 million primarily as a result of the expiration of tax
holidays. The Company does not believe it is reasonably possible that other unrecognized tax benefits will materially
change in the next 12 months. However, the resolutions and/or closure of open audits are highly uncertain.
As of December 25, 2010, the Canada Revenue Agency, or CRA, has completed its audit of ATI for the years
2000 through 2004 and issued its final Notice of Assessment. During the second quarter of 2010, the U.S. Internal
Revenue Service completed its audit of the U.S. Federal income tax returns for the years ending 2004 through 2006
inclusive. As of December 31, 2011 the German tax authorities completed its audit of AMD’s German subsidiaries
for the tax years 2001 through 2004. AMD and its subsidiaries have several foreign, foreign provincial, and U.S.
state audits in process at any one point in time. The Company has provided for uncertain tax positions that require a
liability under the adopted method to account for uncertainty in income taxes. The Company has not recognized any
current or long-term deferred tax assets under a valuation allowance as a result of the application of uncertainty in
income taxes in ASC 740 for unrecognized tax benefits as of December 31, 2011.
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