Burger King 2010 Annual Report Download - page 102

Table of Contents
BURGER KING HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
deferred income tax liability on these unremitted earnings is not practicable. Such liability, if any, depends on circumstances existing if
and when remittance occurs.
The Company had $14.2 million and $15.5 million of unrecognized tax benefits at June 30, 2010 and 2009, respectively, which if
recognized, would affect the effective income tax rate. A reconciliation of the beginning and ending amounts of unrecognized tax
benefits is as follows:
As of June 30,
2010 2009 2008
Beginning balance $ 15.5 18.3 18.9
Additions on tax position related to the current year 1.2 4.5 3.7
Additions for tax positions of prior years 2.7 1.9 0.6
Reductions for tax positions of prior years (2.0) (7.7) (3.9)
Reductions for settlements (2.0) (0.2) (0.1)
Reductions due to statute expiration (1.2) (1.3) (0.9)
Ending Balance $ 14.2 $ 15.5 $ 18.3
During the twelve months beginning July 1, 2010, it is reasonably possible the Company will reduce unrecognized tax benefits by
a range of approximately $2.0 million to $3.0 million, primarily as a result of the expiration of certain statutes of limitations and the
completion of certain tax audits.
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The total amount of
accrued interest and penalties at June 30, 2010 and 2009 was $2.9 million and $3.7 million, respectively. Potential interest and penalties
associated with uncertain tax positions recognized during the years ended June 30, 2010 and 2009 were $0.6 million, each year, and
$1.5 million for the year ended June 30, 2008. To the extent interest and penalties are not assessed with respect to uncertain tax
positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision.
The Company files income tax returns, including returns for its subsidiaries, with federal, state, local and foreign jurisdictions.
Generally the Company is subject to routine examination by taxing authorities in these jurisdictions, including significant international
tax jurisdictions, such as the United Kingdom, Germany, Spain, Switzerland, Singapore and Mexico. None of the foreign jurisdictions
should be individually material. The Company is currently under audit by the U.S. Internal Revenue Service for the years ended
June 30, 2008 and June 30, 2007. The Company also has various state and foreign income tax returns in the process of examination.
From time to time, these audits result in proposed assessments where the ultimate resolution may result in the Company owing
additional taxes. The Company believes that its tax positions comply with applicable tax law and that it has adequately provided for
these matters.
Note 17. Related Party Transactions
The Company paid $1.1 million in registration expenses relating to the secondary offerings during the year ended June 30, 2008.
This amount included registration and filing fees, printing fees, external accounting fees, all reasonable fees and disbursements of one
law firm selected by the Sponsors and all expenses related to the road show for the secondary offerings.
Note 18. Leases
As of June 30, 2010, the Company leased or subleased 1,145 restaurant properties to franchisees and non−restaurant properties to
third parties under capital and operating leases. The building and leasehold improvements of the leases with franchisees are usually
accounted for as direct financing leases and recorded as a net investment in property leased to franchisees, while the land is recorded as
operating leases. Most leases to franchisees provide for
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