Family Dollar 2013 Annual Report Download - page 62

all unrecognized tax benefits recorded, approximately $23.2 million of the gross unrecognized tax benefits,
including penalties and tax effected interest of $6.1 million, would result in income tax benefits in the income
statement of a future period. A reconciliation of the beginning and ending amount of total unrecognized tax
benefits is as follows:
(in thousands)
Unrecognized Tax
Benefit
Interest and
Penalties Total
Balance at August 28, 2010 ........................ $18,335 $ 5,096 $23,431
Increases related to prior year tax positions ........ 6,305 1,799 8,104
Decreases related to prior year tax positions ....... (4,472) — (4,472)
Increases related to current year tax positions ...... 3,190 530 3,720
Settlements during the period ................... (1,542) (553) (2,095)
Lapse of statute of limitations .................. (1,622) (795) (2,417)
Balance at August 27, 2011 ........................ $20,194 $ 6,077 $26,271
Increases related to prior year tax positions ........ 1,147 1,668 2,815
Decreases related to prior year tax positions ....... (3,892) (1,427) (5,319)
Increases related to current year tax positions ...... 4,879 442 5,321
Settlements during the period ................... (3,586) (1,350) (4,936)
Lapse of statute of limitations .................. (1,229) (549) (1,778)
Balance at August 25, 2012 ........................ $17,513 $ 4,861 $22,374
Increases related to prior year tax positions ........ 877 999 1,876
Decreases related to prior year tax positions ....... (997) (11) (1,008)
Increases related to current year tax positions ...... 11,012 1,752 12,764
Settlements during the period ................... (2,962) (1,064) (4,026)
Lapse of statute of limitations .................. (1,340) (477) (1,817)
Balance at August 31, 2013 ........................ $24,103 $ 6,060 $30,163
On a quarterly and annual basis, the Company accrues for the effects of open uncertain tax positions and the
related interest and penalties. The Company is subject to U.S. federal income tax as well as income tax in
multiple foreign, state and local jurisdictions. As of August 31, 2013, the Company was subject to U.S. federal
tax and foreign examinations for fiscal years ending subsequent to 2009. With few exceptions, the Company is
subject to state and local income tax examinations for fiscal years ending subsequent to 2009.
The amount of future unrecognized tax positions may be reduced because the statute of limitations has expired or
the tax position is resolved with the taxing authority. It is reasonably possible that during the next 12 months the
unrecognized tax benefit may be reduced by a range of zero to $4.8 million due to settlements of audits by taxing
authorities. Such unrecognized tax benefits relate primarily to state tax issues.
As of August 31, 2013, the Company has not provided tax on its cumulative undistributed earnings of foreign
subsidiaries of approximately $21.5 million, because it is the Company’s intention to reinvest these earnings
indefinitely. The calculation of the unrecognized deferred tax liability related to these earnings is complex and the
calculation is not practicable. If earnings were distributed, the Company would be subject to U.S. taxes and
withholding taxes payable to various foreign governments. Based on the facts and circumstances at that time, the
Company would determine whether a credit for foreign taxes already paid would be available to reduce or offset the
U.S. tax liability. The Company anticipates earnings would not be repatriated unless it was tax efficient to do so.
11. Employee Benefit Plans:
Incentive compensation plan
The Company has an incentive profit-sharing plan which allows for payments to certain employees and officers
at an aggregate annual amount not to exceed 7% of the Company’s consolidated income before income taxes and
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