Banana Republic 2010 Annual Report Download - page 70

billion, respectively. If we had not intended to utilize the undistributed earnings in our foreign operations for an
indefinite period of time, the deferred tax liability as of January 29, 2011 and January 30, 2010 would have been
approximately $194 million and $148 million, respectively. During fiscal 2010, we assessed the forecasted cash
needs and overall financial position of our foreign subsidiaries. As a result, we determined that approximately $100
million was in excess of the amount we expect to utilize in our foreign operations for an indefinite period of time,
and accordingly, recorded the related tax expense of $7 million in fiscal 2010.
The difference between the effective income tax rate and the U.S. federal income tax rate is as follows:
Fiscal Year
2010 2009 2008
Federal tax rate ........................................................................ 35.0% 35.0% 35.0%
State income taxes, less federal benefit ................................................... 3.6 3.7 3.5
Taximpactofforeignoperations ........................................................ 2.0 1.4 1.7
Other ................................................................................. (1.3) (0.8) (1.2)
Effective tax rate ....................................................................... 39.3% 39.3% 39.0%
Deferred tax assets (liabilities) consist of the following:
($ in millions) January 29, 2011 January 30, 2010
Deferred tax assets:
Deferredrent ................................................................... $114 $113
Accruedpayrollandrelatedbenefits .............................................. 53 98
Nondeductible accruals .......................................................... 59 72
Inventorycapitalizationandotheradjustments .................................... 64 64
Depreciation ................................................................... 39 74
State and foreign net operating losses (“NOLs”) .................................... 35 32
Fair value of derivative financial instruments included in accumulated OCI ............ 88
Other .......................................................................... 100 93
Totaldeferredtaxassets ............................................................. 472 554
NOL valuation allowance ............................................................. (32) (23)
Total deferred tax liabilities ........................................................... (19) (18)
Netdeferredtaxassets .............................................................. $421 $513
Current portion (included in other current assets) ....................................... $190 $193
Non-current portion (included in other long-term assets) ................................ 231 320
Total ............................................................................... $421 $513
At January 29, 2011 we had approximately $60 million state and $121 million foreign NOL carryovers in multiple
taxing jurisdictions that could be utilized to reduce the tax liabilities of future years. The tax effected NOL was
approximately $4 million for state and $31 million for foreign as of January 29, 2011. We provided a valuation
allowance of approximately $1 million and $31 million against the deferred tax asset related to the state and
foreign NOLs, respectively. The state losses expire between fiscal 2022 and fiscal 2023, approximately $111 million of
the foreign losses expire between fiscal 2011 and fiscal 2018, and $10 million of the foreign losses do not expire.
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