GameStop 2012 Annual Report Download - page 107

GAMESTOP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of February 2, 2013, the gross amount of unrecognized tax benefits was approximately $28.7 million. 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 $17.5 million, exclusive of any benefits related to interest and penalties.
A reconciliation of the changes in the gross balances of unrecognized tax benefits follows (in millions):
February 2,
2013
January 28,
2012
January 29,
2011
Beginning balance of unrecognized tax benefits ........... $25.4 $24.9 $35.2
Increases related to current period tax positions ......... 0.5 — —
Increases related to prior period tax positions ........... 6.3 9.9 2.1
Reductions as a result of a lapse of the applicable statute of
limitations ..................................... (3.2) (2.0) (6.4)
Reductions as a result of settlements with taxing
authorities ..................................... (0.3) (7.4) (6.0)
Ending balance of unrecognized tax benefits .............. $28.7 $25.4 $24.9
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax
expense. As of February 2, 2013, January 28, 2012 and January 29, 2011, the Company had approximately
$5.4 million, $3.2 million and $6.2 million, respectively, in interest and penalties related to unrecognized tax
benefits accrued, of which approximately $2.3 million of expense and $2.7 million of benefit were recognized
through income tax expense in the fiscal years ended February 2, 2013 and January 28, 2012, respectively, with
an immaterial amount recognized in income tax expense in the fiscal year ended January 29, 2011. 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.
Deferred taxes have not been provided on undistributed earnings approximating $492.6 million of certain
foreign subsidiaries as of February 2, 2013 because the Company intends to permanently reinvest such earnings
outside the United States. Our current plans do not demonstrate a need to, nor do we have plans to, repatriate the
retained earnings from these subsidiaries as the earnings are permanently reinvested. However, in the future, if
we determine it is necessary to repatriate these funds, or we sell or liquidate any of these subsidiaries, we may be
required to pay associated taxes on the repatriation. We may also be required to withhold foreign taxes depending
on the foreign jurisdiction from which the funds are repatriated. The effective rate of tax on such repatriations
may materially differ from the federal statutory tax rate, thereby having a material impact on tax expense in the
year of repatriation; however, the Company cannot reasonably estimate the amount of such a tax event.
14. Stock Incentive Plan
Effective June 2011, the Company’s stockholders voted to adopt the 2011 Incentive Plan (the “2011
Incentive Plan”) to provide for issuance under the 2011 Incentive Plan of the Company’s Class A Common
Stock. The 2011 Incentive Plan provides a maximum aggregate amount of 9.25 million 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, stock appreciation rights, performance awards, restricted stock and other
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