Google 2008 Annual Report Download - page 111

Google Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
which $201.7 million was realized for tax purpose, and resulted in a tax benefit of $82.3 million in the fourth
quarter. However, we determined based on all positive and negative evidence available that it is more likely than
not that the tax-benefit of $364.5 million related to the remaining capital loss of $893.2 million cannot be realized
and therefore a valuation allowance was established. We are required to reassess the valuation allowance
quarterly, if future evidence allows for a partial or full release of the valuation allowance, a tax benefit will be
recorded accordingly.
Uncertain Tax Positions
The following table summarizes the activity related to our gross unrecognized tax benefits from January 1,
2007 to December 31, 2008 (in thousands):
Balance as of January 1, 2007 ................................................................ $243,588
Increases related to prior year tax positions .................................................... 29,854
Decreases related to prior year tax positions ................................................... (18,997)
Increases related to current year tax positions .................................................. 132,742
Balance as of December 31, 2007 ............................................................ 387,187
Increases related to prior year tax positions .................................................... 111,872
Decreases related to prior year tax positions ................................................... (14,563)
Increases related to current year tax positions .................................................. 236,564
Balance as of December 31, 2008 ............................................................ $721,060
Our total unrecognized tax benefits that, if recognized, would affect our effective tax rate were $283.5 million
and $561.3 million as of December 31, 2007 and December 31, 2008.
As of December 31, 2008, we had accrued $32.1 million for payment of interest. Interest included in our
provision for income taxes was not material in all the periods presented. We have not accrued any penalties related
to our uncertain tax positions as we believe that it is more likely than not that there will not be any assessment of
penalties.
We and our subsidiaries are routinely examined by various taxing authorities. Although we file U.S. federal,
U.S. state, and foreign tax returns, our two major tax jurisdictions are the U.S. and Ireland. During the fourth quarter
ended December 31, 2007, the IRS completed its examination of our 2003 and 2004 tax years. We have filed an
appeal with the IRS for certain issues related to this audit, but we believe we have adequately provided for these
items and any adverse results would have an immaterial impact on our unrecognized tax benefit balance within the
next twelve months. The IRS commenced its examination of our 2005 and 2006 tax years in early 2008. We do
not expect the examination to be completed within the next twelve months, therefore we do not anticipate any
significant impact to our unrecognized tax benefit balance in 2009, related to 2005 and 2006 tax years.
Our 2007 and 2008 tax years remain subject to examination by the IRS for U.S. federal tax purposes, and our
2002 through 2008 tax years remain subject to examination by the appropriate governmental agencies for Irish
tax purposes. There are various other on-going audits in various other jurisdictions that are not material to our
financial statements.
Note 15. Information about Geographic Areas
Our chief operating decision-makers (i.e., chief executive officer, certain of his direct reports and our
founders) review financial information presented on a consolidated basis, accompanied by disaggregated
information about revenues by geographic region for purposes of allocating resources and evaluating financial
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