Foot Locker 2011 Annual Report Download - page 74

FOOT LOCKER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Income Taxes − (continued)
Deferred income taxes are provided for the effects of temporary differences between the amounts of assets
and liabilities recognized for financial reporting purposes and the amounts recognized for income tax
purposes. Items that give rise to significant portions of the Company’s deferred tax assets and deferred tax
liabilities are as follows: 2011 2010
(in millions)
Deferred tax assets:
Tax loss/credit carryforwards and capital loss $ 18 $ 31
Employee benefits 77 67
Property and equipment 166 173
Straight-line rent 27 27
Goodwill and other intangible assets 21 23
Other 32 32
Total deferred tax assets 341 353
Valuation allowance (5) (6)
Total deferred tax assets, net 336 347
Deferred tax liabilities:
Inventories 71 63
Other 86
Total deferred tax liabilities 79 69
Net deferred tax asset $257 $278
Balance Sheet caption reported in:
Deferred taxes $284 $296
Other current assets 2 2
Accrued and other current liabilities (24) (20)
Other liabilities (5) —
$257 $278
The Company operates in multiple taxing jurisdictions and is subject to audit. Audits can involve complex
issues that may require an extended period of time to resolve. A taxing authority may challenge positions
that the Company has adopted in its income tax filings. Accordingly, the Company may apply different tax
treatments for transactions in filing its income tax returns than for income tax financial reporting. The
Company regularly assesses its tax positions for such transactions and records reserves for those
differences.
The Company’s U.S. Federal income tax filings have been examined by the Internal Revenue Service
through 2010. The Company is participating in the IRS’s Compliance Assurance Process (‘‘CAP’’) for 2011,
which is expected to conclude during 2012. The Company has started the CAP for 2012. Due to the recent
utilization of net operating loss carryforwards, the Company is subject to state and local tax examinations
effectively including years from 1996 to the present. To date, no adjustments have been proposed in any
audits that will have a material effect on the Company’s financial position or results of operations.
As of January 28, 2012, the Company has a valuation allowance of $5 million to reduce its deferred tax
assets to an amount that is more likely than not to be realized. The valuation allowance primarily relates to
the deferred tax assets arising from a capital loss associated with the 2008 impairment of the Northern
Group note receivable, state tax loss carryforwards, and state tax credits. A full valuation allowance is
required for the capital loss because the Company does not anticipate realizing capital gains to utilize this
loss. The valuation allowance for state tax loss and credit carryforwards decreased in 2011 principally due
to anticipated expirations of those attributes.
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