Banana Republic 2014 Annual Report Download - page 75

63
The activity related to our unrecognized tax benefits is as follows:
Fiscal Year
($ in millions) 2014 2013 2012
Balance at beginning of fiscal year $ 72 $ 109 $ 102
Increases related to current year tax positions 9 8 10
Prior year tax positions:
Increases 4 8 10
Decreases (9) (47) (12)
Cash settlements (1) (5) (4)
Expiration of statute of limitations — — 3
Foreign currency translation — (1) —
Balance at end of fiscal year $ 75 $ 72 $ 109
Of the $75 million, $72 million, and $109 million of total unrecognized tax benefits as of January 31, 2015,
February 1, 2014, and February 2, 2013, respectively, approximately $31 million, $27 million, and $29 million,
respectively, represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the
effective income tax rate in future periods.
During fiscal 2014, 2013, and 2012, interest expense of $2 million, $4 million, and $5 million, respectively, was
recognized in the Consolidated Statements of Income relating to tax liabilities. In fiscal 2013, we also recognized
an interest expense reversal of $18 million in the Consolidated Statement of Income relating to the favorable
resolution of foreign tax matters. As of January 31, 2015 and February 1, 2014, the Company had total accrued
interest related to the unrecognized tax benefits of $18 million and $17 million, respectively. There were no
accrued penalties related to the unrecognized tax benefits as of January 31, 2015 or February 1, 2014.
The Company conducts business globally, and as a result, files income tax returns in the U.S. federal jurisdiction
and various state and foreign jurisdictions. In the normal course of business, we are subject to examination by
taxing authorities throughout the world, including such major jurisdictions as the United States, Canada, France,
Hong Kong, Japan, India, and the United Kingdom. We are no longer subject to U.S. federal income tax
examinations for fiscal years before 2009, and with few exceptions, we are also no longer subject to U.S. state,
local, or non-U.S. income tax examinations for fiscal years before 2008.
The Company engages in continual discussions with taxing authorities regarding tax matters in the various U.S.
and foreign jurisdictions. As of January 31, 2015, it is reasonably possible that we will recognize a decrease in
gross unrecognized tax benefits within the next 12 months of up to $5 million, primarily due to the closing of
audits. If we do recognize such a decrease, the net impact on the Consolidated Statement of Income would not
be material.
Note 14. Employee Benefit Plans
We have two qualified defined contribution retirement plans, the GapShare 401(k) Plan and the GapShare Puerto
Rico Plan (the “Plans”), which are available to employees who meet the eligibility requirements. The Plans permit
eligible employees to make contributions up to the maximum limits allowable under the applicable Internal
Revenue Codes. Under the Plans, we match, in cash, all or a portion of employees’ contributions under a
predetermined formula. Our contributions vest immediately. Our matching contributions to the Plans were $40
million, $37 million, and $37 million in fiscal 2014, 2013, and 2012, respectively.