Hasbro 2011 Annual Report Download - page 75

HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)
During 2010, as a result of the completion of an examination related to the 2004 and 2005 U.S. federal
income tax returns by the U.S. Internal Revenue Service, the Company recognized approximately $24,200 of
previously accrued unrecognized tax benefits, including the reversal of related accrued interest, primarily related
to the deductibility of certain expenses, as well as the tax treatment of certain subsidiary and other transactions.
Of this amount, $7,032 was recorded as a reduction of deferred tax assets and the remainder as a reduction of
income tax expense. The total income tax benefit resulting from the completion of the examination, including
other adjustments, totaled approximately $21,000 during 2010.
In connection with tax examinations in Mexico for the years 2000 to 2005, the Company has received tax
assessments totaling approximately $177,430, which includes interest, penalties and inflation updates, related to
transfer pricing which the Company is vigorously defending. In order to continue the process of defending its
position, the Company was required to guarantee the amount of the assessments for the years 2000 to 2004, as is
usual and customary in Mexico with respect to these matters. Accordingly, as of December 25, 2011, bonds
totaling approximately $150,840 (at year-end 2011 exchange rates) have been provided to the Mexican
government related to the 2000 through 2004 assessments, allowing the Company to defend its positions. The
Company is not currently required to guarantee the amount of the 2005 assessment. The Company expects to be
successful in sustaining its position with respect to these assessments as well as similar positions that may be
taken by the Mexican tax authorities for periods subsequent to 2005.
The Company believes it is reasonably possible that certain tax examinations and statutes of limitations may
be concluded and will expire within the next 12 months, and that unrecognized tax benefits, excluding potential
interest and penalties, may decrease by up to approximately $3,100, substantially all of which would be recorded
as a tax benefit in the statement of operations. In addition, approximately $600 of potential interest and penalties
related to these amounts would also be recorded as a tax benefit in the consolidated statement of operations.
The cumulative amount of undistributed earnings of Hasbro’s international subsidiaries held for indefinite
reinvestment is approximately $1,391,000 at December 25, 2011. In the event that all international undistributed
earnings were remitted to the United States, the amount of incremental taxes would be approximately $337,000.
(11) Capital Stock
In May 2011 the Company’s Board of Directors authorized the repurchase of up to $500,000 in common
stock after five previous authorizations dated May 2005, July 2006, August 2007, February 2008 and April 2010
with a cumulative authorized repurchase amount of $2,325,000 were fully utilized. Purchases of the Company’s
common stock may be made from time to time, subject to market conditions, and may be made in the open
market or through privately negotiated transactions. The Company has no obligation to repurchase shares under
the authorization and the time, actual number, and the value of the shares which are repurchased will depend on a
number of factors, including the price of the Company’s common stock. In 2011, the Company repurchased
10,461 shares at an average price of $40.42. The total cost of these repurchases, including transaction costs, was
$423,008. At December 25, 2011, $227,269 remained under the current authorization.
(12) Fair Value of Financial Instruments
The Company measures certain assets at fair value in accordance with current accounting standards. The fair
value hierarchy consists of three levels: Level 1 fair values are valuations based on quoted market prices in active
markets for identical assets or liabilities that the entity has the ability to access; Level 2 fair values are those
valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or
other inputs that are observable or can be corroborated by observable data for substantially the full term of the
assets or liabilities; and Level 3 fair values are valuations based on inputs that are supported by little or no market
activity and that are significant to the fair value of the assets or liabilities.
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