IHOP 2011 Annual Report Download - page 111

DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
93
Net deferred tax assets (liabilities) consisted of the following components:
Differences in capitalization and depreciation and amortization of reacquired franchises and
equipment
Differences in acquisition financing costs
Employee compensation
Deferred gain on sale of assets
Book/tax difference in revenue recognition
Michigan business tax
Kansas High Performance Incentive Program credits
Other
Deferred tax assets
Valuation allowance
Total deferred tax assets after valuation allowance
Differences between financial and tax accounting in the recognition of franchise and
equipment sales
Differences in capitalization and depreciation (1)
Differences in acquisition financing costs
Book/tax difference in revenue recognition
Differences between book and tax basis of property and equipment
Other
Deferred tax liabilities
Net deferred tax (liabilities)
Net deferred tax asset (liability)—current
Valuation allowance—current
Net deferred tax asset (liability)—current
Net deferred tax asset (liability)—non current
Valuation allowance—non current
Net deferred tax asset (liability)—non current
Net deferred tax (liabilities)
2011
(In millions)
$ 4.9
1.9
14.2
2.0
18.1
—
—
35.9
77.0
(2.9)
74.1
(59.4)
(322.2)
(9.3)
(19.8)
(9.8)
(16.8)
(437.3)
$ (363.2)
$ 21.0
(0.4)
20.6
(381.3)
(2.5)
(383.8)
$ (363.2)
2010
$ 4.9
1.9
17.1
2.0
16.6
9.5
3.2
37.6
92.8
(9.6)
83.2
(63.4)
(325.6)
(0.5)
(22.6)
(8.9)
(13.6)
(434.6)
$ (351.4)
$ 27.0
(2.7)
24.3
(368.8)
(6.9)
(375.7)
$ (351.4)
_____________________________________
(1) Primarily related to the Applebee's acquisition.
The Company and its subsidiaries file federal income tax returns and income tax returns in various state and foreign
jurisdictions. With few exceptions, the Company is no longer subject to federal, state or non-United States tax examinations by
tax authorities for years before 2007. Applebee's is currently under audit by the United States Internal Revenue Service for the
period ended November 29, 2007. The Internal Revenue Service commenced examination of the Company's U.S. federal income
tax return for the tax years 2008 to 2010 in the first quarter of 2012. The examination is anticipated to be completed by the first
quarter of 2013.
At December 31, 2011, the Company had a liability for unrecognized tax benefit including potential interest and penalties,
net of related tax benefit, totaling $8.9 million, of which approximately $2.0 million is expected to be paid within one year. For
the remaining liability, due to the uncertainties related to these tax matters, the Company is unable to make a reasonably reliable
estimate when a cash settlement with a taxing authority will occur.
The total unrecognized tax benefit as of December 31, 2011 and 2010 was $8.2 million and $12.8 million, respectively,
excluding interest, penalties and related income tax benefits. The decrease of $4.6 million is primarily related to settlements with
taxing authorities resulting in a decrease in unrecognized tax benefits related to prior year positions. The entire $8.2 million will
be included in the Company's effective income tax rate if recognized.
The Company estimates the unrecognized tax benefits may decrease over the upcoming 12 months by an amount up to $2.8
million related to settlements with taxing authorities and the lapse of the statute of limitations. A reconciliation of the beginning
and ending amount of unrecognized tax benefits is as follows: