Adobe 2010 Annual Report Download - page 107

ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
107
Accounting for Uncertainty in Income Taxes
During fiscal 2010 and 2009, our aggregate changes in our total gross amount of unrecognized tax benefits are
summarized as follows (in thousands):
2010
2009
Beginning balance ...................................................................................................
$
218,040
$
139,549
Gross increases in unrecognized tax benefits – prior year tax positions ..............
9,580
44,696
Gross decreases in unrecognized tax benefits – prior year tax positions .............
(7,104)
(1,523)
Gross increases in unrecognized tax benefits – current year tax positions ..........
15,108
42,422
Settlements with taxing authorities ......................................................................
(70,484
)
(429
)
Lapse of statute of limitations ..............................................................................
(7,896
)
(12,585
)
Foreign exchange gains and losses ......................................................................
(319)
5,910
Ending balance ........................................................................................................
$
156,925
$
218,040
As of December 3, 2010, the combined amount of accrued interest and penalties related to tax positions taken on our tax
returns and included in non-current income taxes payable was approximately $15.4 million.
We file income tax returns in the U.S. on a federal basis and in many U.S. state and foreign jurisdictions. We are subject
to the continual examination of our income tax returns by the IRS and other domestic and foreign tax authorities. Our major
tax jurisdictions are the U.S., Ireland and California. For California, Ireland and the U.S., the earliest fiscal years open for
examination are 2005, 2004 and 2008, respectively. We regularly assess the likelihood of outcomes resulting from these
examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that
may result from the current examination. We believe such estimates to be reasonable; however, there can be no assurance that
the final determination of any of these examinations will not have an adverse effect on our operating results and financial
position.
In October 2010, a U.S. income tax examination covering our fiscal years 2005 through 2007 was completed. Our
accrued tax and interest related to these years was $59 million and was previously reported in long-term income taxes
payable. We paid $20 million in conjunction with the aforementioned resolution. A net income statement tax benefit in the
fourth quarter of fiscal 2010 of $39 million resulted.
The timing of the resolution of income tax examinations is highly uncertain as are the amounts and timing of tax
payments that are part of any audit settlement process. These events could cause large fluctuations in the balance sheet
classification of current and non-current assets and liabilities. The Company believes that before the end of fiscal 2011, it is
reasonably possible that either certain audits will conclude or statutes of limitations on certain income tax examination
periods will expire, or both. Given the uncertainties described above, we can only determine a range of estimated potential
decreases in underlying unrecognized tax benefits ranging from $0 to approximately $5 million. These amounts would
decrease income tax expense under current GAAP related to income taxes and as a result of our adoption of new accounting
standards related to business combinations in fiscal 2010 (see Note 1). Adjustments to acquired income tax liabilities
(including adjustments for acquisitions completed prior to the effective date) that are recorded subsequent to the acquisition
date will be recognized in income from continuing operations, with certain exceptions, if such changes occur after the
measurement period.
NOTE 11. RESTRUCTURING
Fiscal 2009 Restructuring Plan
On November 10, 2009, in order to appropriately align our costs in connection with our fiscal 2010 operating plan, we
initiated a restructuring plan consisting of reductions of up to approximately 630 full-time positions worldwide. In connection
with this restructuring plan, in the fourth quarter of fiscal 2009, we recorded restructuring charges of approximately $25.5
million related to ongoing termination benefits for the elimination of approximately 340 of these full-time positions
worldwide. The restructuring activities related to this program affect only those employees and facilities that were associated
with Adobe prior to the acquisition of Omniture on October 23, 2009.
During fiscal 2010, we continued to implement restructuring activities under this plan. We vacated approximately
50,000 square feet of sales and or research and development facilities in Australia, Canada, Denmark and the U.S. We
accrued $7.0 million for the fair value of our future contractual obligations under these operating leases using our credit-