Home Depot 2007 Annual Report Download - page 70

beginning and ending amount of gross unrecognized tax benefits for continuing operations is as follows (amounts in millions):
The gross amount of unrecognized tax benefits as of February 3, 2008 includes $368 million of net unrecognized tax benefits that, if recognized,
would affect the annual effective income tax rate.
During fiscal 2007, the Company increased its interest accrual associated with uncertain tax positions by approximately $32 million and paid
interest of approximately $8 million. Total accrued interest as of February 3, 2008 is $140 million. There were no penalty accruals during fiscal
2007. Interest and penalties are included in net interest expense and operating expenses, respectively. Our classification of interest and penalties
did not change as a result of the adoption of FIN 48.
The Company believes that some individual adjustments under appeal for the completed IRS and Canada audits, as well as other state audits,
will be agreed upon within the next twelve months. The IRS issues generally concern the useful life of assets and relevant transfer pricing for
intangible assets provided to foreign operations. The Canada issues generally concern the relevant transfer pricing for intangible assets provided
from the U.S. State issues generally concern related party expense add-back provisions and forced combination filings. The Company has
classified approximately $6 million of the reserve for unrecognized tax benefits as a short-term liability in the accompanying Consolidated
Balance Sheets. In addition, there is a reasonable possibility that the Company may resolve the Quebec assessment from prior years, which
totaled $65 million at February 3, 2008, within the next twelve months. Final settlement of these audit issues may result in payments that are
more or less than these amounts, but the Company does not anticipate the resolution of these matters will result in a material change to its
consolidated financial position or results of operations.
7. EMPLOYEE STOCK PLANS
The Home Depot, Inc. 2005 Omnibus Stock Incentive Plan ("2005 Plan") and The Home Depot, Inc. 1997 Omnibus Stock Incentive Plan ("1997
Plan" and collectively with the 2005 Plan, the "Plans") provide that incentive and non-qualified stock options, stock appreciation rights,
restricted shares, performance shares, performance units and deferred shares may be issued to selected associates, officers and directors of the
Company. Under the 2005 Plan, the maximum number of shares of the Company's common stock authorized for issuance is 255 million shares,
with any award other than a stock option reducing the number of shares available for issuance by 2.11 shares. As of February 3, 2008, there were
224 million shares available for future grants under the 2005 Plan. No additional equity awards may be issued from the 1997 Plan after the
adoption of the 2005 Plan on May 26, 2005.
Under the Plans, as of February 3, 2008, the Company had granted incentive and non-qualified stock options for 177 million shares, net of
cancellations (of which 127 million have been exercised). Under the terms of the Plans, incentive stock options and non-qualified stock options
are to be priced at or above the fair market value of the Company's stock on the date of the grant. Typically, incentive stock options and non-
qualified stock options vest at the rate of 25% per year commencing on the first anniversary date of the grant and expire on the tenth anniversary
date of the grant. The non-qualified
53
February 3,
2008
Unrecognized tax benefits balance at January 29, 2007
$
667
Additions based on tax positions related to the current year
66
Additions for tax positions of prior years
25
Reductions for tax positions of prior years
(115
)
Reductions due to settlements
(31
)
Reductions due to lapse of statute of limitations
(4
)
Unrecognized tax benefits balance at February 3, 2008
$
608