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May 2, 2015 May 3, 2014
Deferred tax assets:
Estimated accrued
liabilities $131,347 $ 124,875
Inventory 28,437 42,671
Insurance liability 9,149 8,804
Loss and credit
carryovers 28,735 47,308
Lease transactions 25,292 24,499
Pension 6,175 4,885
Stock-based
compensation 4,565 6,364
Investments in equity
securities 39 1,564
Depreciation 4,501 —
Other 809 1,263
Gross deferred tax assets 239,049 262,233
Valuation allowance (1,215) (19,176)
Net deferred tax assets 237,834 243,057
Deferred tax liabilities:
Prepaid expenses (6,777) (6,900)
Goodwill and intangible
asset amortization (210,249) (209,541)
Investment in Barnes &
Noble.com (78,526) (78,554)
Depreciation — (15,257)
Gross deferred tax
liabilities (295,552) (310,252)
Net deferred tax
liabilities $ (57,718) $ (67,195)
In assessing the realizability of the deferred tax assets,
management considered whether it is more likely than not
that some or all of the deferred tax assets would be realized.
In evaluating the Company’s ability to utilize its deferred
tax assets, it considered all available evidence, both posi-
tive and negative, in determining future taxable income
on a jurisdiction by jurisdiction basis. The Company has
recorded a valuation allowance of , and , at May
,  and May , , respectively. The , decrease
in the valuation allowance during fiscal  is due prin-
cipally to the actual utilization of deferred tax assets in the
current fiscal year.
At May , , and based on its tax year ended January
, the Company had federal net operating loss car-
ryforwards (NOLs) of approximately , and state net
operating loss carryforwards of , that are available
to offset taxable income in its respective taxing jurisdiction
beginning in the current period and that expire beginning
in  through . The utilization of federal net operat-
ing loss carryforward is limited to approximately , on
an annual basis. NOLs not used during a particular period
may be carried forward to future years, though not beyond
the expiration years. Additionally, the Company had
approximately , of state NOLs that have no annual
limitation and expire beginning in . The Company had
net federal and state tax credits totaling ,, which has
an indefinite life.
As of May , , the Company had , of unrecog-
nized tax benefits, all of which, if recognized, would affect
the Company’s effective tax rate. A reconciliation of the
beginning and ending amount of unrecognized tax benefits
for fiscal , fiscal  and fiscal  is as follows:
Balance at April 28, 2012 $ 13,135
Additions for tax positions of the current period 3,189
Additions for tax positions of prior periods 9,187
Reductions due to settlements (370)
Other reductions for tax positions of prior periods (3,815)
Balance at April 27, 2013 $ 21,326
Additions for tax positions of the current period 2,693
Additions for tax positions of prior periods 2,206
Reductions due to settlements —
Other reductions for tax positions of prior periods (7,070)
Balance at May 3, 2014 $ 19,155
Additions for tax positions of the current period 731
Additions for tax positions of prior periods —
Reductions due to settlements —
Other reductions for tax positions of prior periods (1,504)
Balance at May 2, 2015 $ 18,382
The Company’s policy is to recognize interest and penalties
related to income tax matters in income tax expense. The
Company recorded net interest and penalties expense of
approximately ,,  and , during fiscal ,
fiscal  and fiscal , respectively. As of May , 
and May , , the Company had net accrued interest and
penalties of , and ,, respectively. Further, we
believe that it is reasonably possible that the total amount
of unrecognized tax benefits at January ,  could
decrease by approximately , within the next twelve
months, as a result, of settlement of certain tax audits or
lapses of statutes of limitation. Such decreases may involve
the payment of additional taxes, the adjustment of deferred
52 Barnes & Noble, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued