Blizzard 2009 Annual Report Download - page 75

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63
AsofDecember31,2009,ouravailablefederalnetoperatinglosscarryforwardofapproximately
$1millionissubjecttocertainlimitationsasdefinedunderSection382oftheInternalRevenueCode.The
netoperatinglosscarryforwardwillbegintoexpirein2023.Wehavevariousstatenetoperatingloss
carryforwardstotaling$17millionwhicharenotsubjecttolimitationsunderSection382oftheInternal
RevenueCodeandwillbegintoexpirein2013.Wehavetaxcreditcarryforwardsof$6millionand
$55millionforfederalandstatepurposes,respectively,whichbegintoexpireinfiscal2016.
Throughourforeignoperations,wehaveapproximately$18millioninnetoperatingloss
carryforwardsatDecember31,2009,attributedmainlytolossesinFrance,Ireland,andSweden.We
evaluateourdeferredtaxassets,includingnetoperatinglosses,todetermineifavaluationallowanceis
required.Weassesswhetheravaluationallowanceshouldbeestablishedorreleasedbasedonthe
considerationofallavailableevidenceusinga“morelikelythannot”standard.Inmakingsuchjudgments,
significantweightisgiventoevidencethatcanbeobjectivelyverified.AtDecember31,2008wehada
foreignnetoperatinglossvaluationallowanceof$22million.During2009,wedeterminedthatsuchnet
operatinglosseswerelikelytoberealizedthroughtaxableincome;therefore,wereleasedavaluation
allowanceof$22millionagainstourdeferredtaxassets.AtDecember31,2009therearenovaluation
allowancesondeferredtaxassets.
RealizationoftheU.S.deferredtaxassetsisdependentuponthecontinuedgenerationofsufficient
taxableincomepriortoexpirationoftaxcreditsandlosscarryforwards.Althoughrealizationisnotassured,
managementbelievesitismorelikelythannotthatthenetcarryingvalueoftheU.S.deferredtaxassets
willberealized.
Cumulativeundistributedearningsofforeignsubsidiariesforwhichnodeferredtaxeshavebeen
providedapproximated$498millionatDecember31,2009.Deferredincometaxesontheseearningshave
notbeenprovidedastheseamountsareconsideredtobepermanentinduration.Itisnotpracticalto
estimatetheamountoftaxthatwouldbepayableupondistributionoftheseearnings.
AsofDecember31,2009,wehadapproximately$139millionintotalunrecognizedtaxbenefits
ofwhich$131millionwouldaffectoureffectivetaxrateifrecognized.Areconciliationofunrecognized
taxbenefitsfortheyearsendedDecember31,2009,2008and2007isasfollows(amountsinmillions):
AtDecember31,
2009
2008
2007
UnrecognizedtaxbenefitsbalanceatJanuary1................................
$103
$13
$—
Assumptionofunrecognizedtaxbenefitsuponthe
BusinessCombination................................................................
—
73
—
Grossincreasefortaxpositionsofprioryears................................
3
12
1
Grossdecreasefortaxpositionsofprioryears................................
(1)
(2)
—
Grossincreasefortaxpositionsofcurrentyear................................
35
7
12
Grossdecreasefortaxpositionsofcurrentyear................................
—
—
—
Settlements..............................................................................................
—
—
—
Lapseofstatuteoflimitations................................................................
(1)
—
—
UnrecognizedtaxbenefitsbalanceatDecember31................................
$139
$103
$13
Inaddition,asofDecember31,2009and2008,wereflected$123millionand$81million,
respectively,ofincometaxliabilitiesasnoncurrentliabilitiesbecausepaymentofcashorsettlementisnot
anticipatedwithinoneyearofthebalancesheetdate.Thesenoncurrentincometaxliabilitiesarerecorded
inotherliabilitiesintheconsolidatedbalancesheetsasofDecember31,2009and2008.
Werecognizeinterestandpenaltiesrelatedtouncertaintaxpositionsinincometaxexpense.Asof
December31,2009and2008,wehadapproximately$8millionand$2million,respectively,ofaccrued
interestandpenaltiesrelatedtouncertaintaxpositions.FortheyearsendedDecember31,2009and2008,
werecorded$6millionand$1millionofinterestexpenserelatedtouncertaintaxpositions,respectively.
VivendiGamesresultsfortheperiodJanuary1,2008throughJuly9,2008areincludedinthe
consolidatedfederalandcertainforeign,stateandlocalincometaxreturnsfiledbyVivendioritsaffiliates