Arrow Electronics 2010 Annual Report Download - page 70

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ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
68
During 2008, the company recorded a reduction of the provision for income taxes of $8,450 and an
increase in interest expense of $1,009 ($962 net of related taxes) primarily related to the settlement of
certain international income tax matters covering multiple years.
At December 31, 2010, the company had a liability for unrecognized tax benefits of $66,110 (substantially
all of which, if recognized, would favorably affect the company's effective tax rate). The company does
not believe there will be any material changes in its unrecognized tax positions over the next twelve
months, other than a payment of approximately $11,600 relating to the previously discussed tax
settlement.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended
December 31 is as follows:
2010 2009
Balance at beginning of year $ 68,833 $ 69,719
Additions based on tax positions taken during a prior period 14,067 12,442
Reductions based on tax positions taken during a prior period (20,273 ) (9,000)
Additions based on tax positions taken during the current period 5,835 742
Reductions based on tax positions taken during the current period - -
Reductions related to settlement of tax matters (65 ) (4,994)
Reductions related to a lapse of applicable statute of limitations (2,287 ) (76)
Balance at end of year $ 66,110 $ 68,833
Interest costs related to unrecognized tax benefits are classified as a component of "Interest and other
financing expense, net" in the company's consolidated statements of operations. In 2010, 2009, and
2008, the company recognized $(1,599), $4,678, and $1,476, respectively, of interest expense related to
unrecognized tax benefits. At December 31, 2010 and 2009, the company had a liability for the payment
of interest of $12,348 and $13,328, respectively, related to unrecognized tax benefits.
In many cases the company's uncertain tax positions are related to tax years that remain subject to
examination by tax authorities. The following describes the open tax years, by major tax jurisdiction, as of
December 31, 2010:
United States – Federal 2008 – present
United States – State 2001 – present
Germany (a) 2007 – present
Hong Kong 2004 – present
Italy (a) 2006 – present
Sweden 2004 – present
United Kingdom 2008 – present
(a) Includes federal as well as local jurisdictions.
Deferred income taxes are provided for the effects of temporary differences between the tax basis of an
asset or liability and its reported amount in the consolidated balance sheets. These temporary differences
result in taxable or deductible amounts in future years.