Dillard's 2009 Annual Report Download - page 66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Income Taxes (Continued)
Deferred tax assets and liabilities are presented as follows in the accompanying consolidated
balance sheets:
(in thousands of dollars) January 30, 2010 January 31, 2009
Net deferred tax liabilities-noncurrent ........... $349,722 $378,348
Net deferred tax liabilities-current .............. 26,749 36,605
Net deferred tax liabilities .................. $376,471 $414,953
The total amount of unrecognized tax benefits as of January 30, 2010 and January 31, 2009 was
$18.2 million and $27.3 million, respectively, of which $13.8 million and $19.5 million, respectively,
would, if recognized, affect the effective tax rate. The Company classifies accrued interest expense and
penalties relating to income tax in the consolidated financial statements as income tax expense. The
total interest and penalties recognized in the consolidated statements of operations as of January 30,
2010, January 31, 2009 and February 2, 2008 was $(2.0) million, $0.6 million, and $(4.4) million,
respectively. The total accrued interest and penalties in the consolidated balance sheets as of
January 30, 2010 and January 31, 2009 was $7.1 million and $9.4 million, respectively.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Fiscal Fiscal Fiscal
(in thousands of dollars) 2009 2008 2007
Unrecognized tax benefits at beginning of period .... $27,276 $25,415 $27,639
Gross increases—tax positions in prior period ..... 329 1,778 8,659
Gross decreases—tax positions in prior period ..... (9,188) (2,460) (10,372)
Gross increases—current period tax positions ...... 1,073 2,770 2,083
Settlements .............................. (1,247) (198) (2,538)
Lapse of statute of limitations ................. (10) (29) (56)
Unrecognized tax benefits at end of period ......... $18,233 $27,276 $25,415
The Company is currently being examined by the IRS for the fiscal tax years 2006 through 2007.
During fiscal 2008, the IRS completed its examination of the Company’s federal income tax returns for
the fiscal tax years 2003 through 2005. Certain issues relating to this examination are currently under
appeal. The Company is also under examination by various state and local taxing jurisdictions for
various fiscal years. The tax years that remain subject to examination for major tax jurisdictions are
fiscal tax years 2003 and forward, with the exception of fiscal 1997 through 2002 amended state and
local tax returns related to the reporting of federal audit adjustments. At this time, the Company does
not expect the results from any income tax audit to have a material impact on the Company’s
consolidated financial statements.
The Company has taken positions in certain taxing jurisdictions for which it is reasonably possible
that the total amounts of unrecognized tax benefits may decrease within the next twelve months. The
possible decrease could result from the finalization of the Company’s federal and various state income
tax audits. The Company’s federal income tax audit uncertainties primarily relate to research and
development credits, while various state income tax audit uncertainties primarily relate to income from
intangible assets. The estimated range of the reasonably possible uncertain tax benefit decrease in the
next twelve months is between $4 million and $8 million. Changes in the Company’s assumptions and
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