Ingram Micro 2008 Annual Report Download - page 74

foreign subsidiaries. Determination of the amount of unrecognized deferred tax liability related to these earnings is
not practicable.
Tax benefits in excess of (less than) the amount recorded upon grant, resulting from the exercise of employee
stock options and other employee stock programs, are recorded as an increase (decrease) in stockholders’ equity and
were $(784) in fiscal 2008 and $5,650 in fiscal 2007.
Effective December 31, 2006, the beginning of fiscal year 2007, the Company adopted the provisions of
Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an
interpretation of FASB Statement No. 109” (“FIN 48”). The adoption of FIN 48 resulted in an increase of $4,957 in
the Company’s liability for unrecognized tax benefits, which was accounted for as a reduction to its consolidated
retained earnings as of the beginning of 2007. As of the adoption date, the Company had gross unrecognized tax
benefits of $16,736, substantially all of which, if recognized, would have impacted the effective tax rate. The
Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. As of the
adoption date, the Company had estimated accrued interest and penalties related to the unrecognized tax benefits of
$3,728. This amount was reduced by $1,272 and $609 during fiscal 2008 and 2007, respectively, primarily due to
the conclusion of the U.S. IRS audit for tax years 2001 through 2003 discussed below.
A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits
is as follows:
Gross unrecognized tax benefits at December 29, 2007 .......................... $20,168
Increases in tax positions for prior years ..................................... 144
Decreases in tax positions for prior years..................................... (270)
Increases in tax positions for current year .................................... 3,099
Decreases in tax positions for current year .................................... (28)
Settlements ........................................................... (11,890)
Lapse in statute of limitations ............................................. —
Gross unrecognized tax benefits at January 3, 2009 ............................. $11,223
Substantially all of the unrecognized tax benefits of $11,223 at January 3, 2009 would impact the effective tax
rate, if recognized.
The Company conducts business globally and, as a result, the Company and/or one or more of its subsidiaries
file income tax returns in the U.S. federal and various state jurisdictions and in over thirty foreign jurisdictions. In
the normal course of business, the Company is subject to examination by taxing authorities in many of the
jurisdictions in which it operates.
In the U.S., the Company concluded its IRS federal income tax audit for tax years 2001 through 2003 during
the first quarter of 2007, effectively closing all years to IRS audit up through 2003. Based on the conclusion of the
IRS audit, the Company reversed tax liabilities of $4,875 in 2007, of which $3,128 was related to a previously
recorded FIN 48 reserve. During the second quarter of 2007, the IRS initiated an examination of the Company’s
federal income tax return for the tax years 2004 and 2005. In addition to the ongoing IRS audit for 2004-2005, a
number of U.S. state and local and foreign tax examinations are currently ongoing.
The Company is engaged in continuous discussions and negotiations with taxing authorities regarding tax
matters in the various jurisdictions, which resulted in an effective settlement on several items, including issues
related to transfer pricing and hedge gains, in fiscal 2008. These settlements resulted in a net reversal of FIN 48 tax
liabilities of $11,890 in 2008.
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INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)