GameStop 2009 Annual Report Download - page 95

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The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and
foreign jurisdictions. The Internal Revenue Service (“IRS”) commenced an examination of the Company’s
U.S. income tax returns for the fiscal years ended on February 3, 2007 and February 2, 2008 during fiscal
2009. The Company does not anticipate any adjustments that would result in a material impact on its consolidated
financial statements as a result of these audits. The Company is no longer subject to U.S. federal income tax
examination for years before and including the fiscal year ended January 28, 2006. The IRS completed an
examination of EB’s U.S. income tax return for the short year ended October 8, 2005 during fiscal 2009. EB is no
longer subject to U.S. federal income tax examination by tax authorities for fiscal years prior to and including the
short year ended October 8, 2005.
With respect to state and local jurisdictions and countries outside of the United States, the Company and its
subsidiaries are typically subject to examination for three to six years after the income tax returns have been filed.
Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest
and penalties have been provided for in the accompanying financial statements for any adjustments that might be
incurred due to state, local or foreign audits.
As of January 30, 2010, the gross amount of unrecognized tax benefits was approximately $35,184. If the
Company were to prevail on all uncertain tax positions, the net effect would be a benefit to the Company’s effective
tax rate of approximately $28,245, exclusive of any benefits related to interest and penalties.
A reconciliation of the changes in the gross balances of unrecognized tax benefits follows (in thousands):
January 30,
2010
January 31,
2009
February 2,
2008
Beginning balance of unrecognized tax benefits ........... $32,234 $24,225 $25,250
Increases related to current period tax positions ......... 4,972 974 132
Increases (decreases) related to prior period tax positions . . 8,139 8,667 (116)
Reductions as a result of a lapse of the applicable statute
of limitations ................................ (1,542) (1,072) (1,041)
Reductions as a result of settlements with taxing
authorities . . . ................................ (8,619) (560) —
Ending balance of unrecognized tax benefits ............. $35,184 $32,234 $24,225
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax
expense. As of January 30, 2010, January 31, 2009 and February 2, 2008 the Company had approximately $6,939,
$5,656 and $3,674, respectively, in interest and penalties related to unrecognized tax benefits accrued of which
approximately $1,417, $2,276 and $572 of benefit was recognized through income tax expense in the fiscal years
ended January 30, 2010, January 31, 2009 and February 2, 2008, respectively. If the Company were to prevail on all
uncertain tax positions, the reversal of this accrual would also be a benefit to the Company’s effective tax rate.
It is reasonably possible that the amount of the unrecognized benefit with respect to certain of the Company’s
unrecognized tax positions could significantly increase or decrease within the next 12 months as a result of settling
ongoing audits. At this time, an estimate of the range of the reasonably possible outcomes cannot be made.
13. Stock Incentive Plan
Effective June 2009, the Company’s stockholders voted to amend the Third Amended and Restated 2001
Incentive Plan (the “Incentive Plan”) to provide for issuance under the Incentive Plan of the Company’s Class A
common stock. The Incentive Plan provides a maximum aggregate amount of 46,500 shares of Class A common
stock with respect to which options may be granted and provides for the granting of incentive stock options, non-
qualified stock options, and restricted stock, which may include, without limitation, restrictions on the right to vote
such shares and restrictions on the right to receive dividends on such shares. The options to purchase Class A
F-27
GAMESTOP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)