Dillard's 2010 Annual Report Download - page 64

Notes to Consolidated Financial Statements (Continued)
7. Income Taxes (Continued)
Deferred tax assets and liabilities are presented as follows in the accompanying consolidated
balance sheets:
January 29, January 30,
(in thousands of dollars) 2011 2010
Net deferred tax liabilities—noncurrent ................ $341,689 $349,722
Net deferred tax liabilities—current ................... 55,800 26,749
Net deferred tax liabilities ........................ $397,489 $376,471
The total amount of unrecognized tax benefits as of January 29, 2011 and January 30, 2010 was
$9.1 million and $18.2 million, respectively, of which $6.3 million and $13.8 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 29,
2011, January 30, 2010 and January 31, 2009 was $(2.3) million, $(2.0) million, and $0.6 million,
respectively. The total accrued interest and penalties in the consolidated balance sheets as of
January 29, 2011 and January 30, 2010 was $3.7 million and $7.1 million, respectively.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Fiscal Fiscal Fiscal
(in thousands of dollars) 2010 2009 2008
Unrecognized tax benefits at beginning of period .... $18,233 $27,276 $25,415
Gross increases—tax positions in prior period ..... — 329 1,778
Gross decreases—tax positions in prior period ..... (6,461) (9,188) (2,460)
Gross increases—current period tax positions ...... 861 1,073 2,770
Settlements .............................. (3,527) (1,247) (198)
Lapse of statute of limitations ................. — (10) (29)
Unrecognized tax benefits at end of period ......... $ 9,106 $18,233 $27,276
The Company is currently being examined by the IRS for the fiscal tax years 2008 through 2009.
During fiscal 2010, the IRS completed its examination of the Company’s federal income tax returns for
the fiscal tax years 2006 through 2007. 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 2006 and forward, with the exception of fiscal 2003 through
2005 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 $0.5 million and $2.5 million. Changes in the Company’s assumptions
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