Ingram Micro 2010 Annual Report Download - page 68

credits prior to expiry through 2020. At January 1, 2011, total deferred tax assets related to foreign tax credit
carryforwards was $61,339 and our total valuation allowance related to such credit carryforwards were $43,246.
At January 1, 2011, we also had deferred tax assets related to net operating loss carryforwards of $202,452,
with a valuation allowance of $180,323, with the net amount reflecting the amount more likely than not to be
realized. Of the remaining $22,129 of deferred tax assets, net of valuation allowance, on net operating loss
carryforwards, $21,649 has no expiration date, with the remainder having expiration dates through the year 2027.
As noted above, $39,362 of the $47,684 increase in valuation allowance during 2010 is due to the valuation
allowance established on deferred tax assets related to foreign tax credit carryforwards generated on the repatriation
of earnings from one of our Canadian subsidiaries. The remaining $8,322 increase relates primarily to book
operating losses in certain subsidiaries that are currently not expected to be realized through future taxable income
in these entities, partially offset by previously reserved amounts which became realizable based on taxable income
generated in the current year, as well as the impacts of translation adjustments for previously established valuation
allowances in currencies other than the U.S. dollar.
We have not provided deferred taxes on certain undistributed earnings from our foreign subsidiaries that are
indefinitely reinvested. These undistributed earnings may become taxable upon an actual or deemed repatriation of
assets from the subsidiaries or a sale or liquidation of the subsidiaries. We estimate that our total net undistributed
earnings upon which we have not provided deferred tax total approximately $1,700,000 at January 1, 2011 versus
$1,600,000 at January 2, 2010. A determination of the deferred tax liability on such earnings is not practicable as
such liability is dependent upon our U.S. foreign tax credit position that would exist at the time any remittance
would occur.
Tax benefits claimed from the exercise of employee stock options and other employee stock programs that are
in excess of the amount recorded upon grant are recorded as an increase in stockholders’ equity. In 2010 and 2009,
these amounts totaled $3,405 and $3,921, respectively.
The total amount of gross unrecognized tax benefits is $23,641 as of January 1, 2011, substantially all of which
would impact the effective tax rate if recognized. A reconciliation of the beginning and ending balances of the total
amounts of gross unrecognized tax benefits is as follows:
2010 2009 2008
Fiscal Year Ended
Gross unrecognized tax benefits at beginning of the year ........ $21,254 $11,223 $ 20,168
Increases in tax positions for prior years .................... 805 3,666 144
Decreases in tax positions for prior years ................... (2,459) (781) (270)
Increases in tax positions for current year ................... 4,877 9,513 3,099
Decreases in tax positions for current year .................. (54) — (28)
Settlements ......................................... — (2,036) (11,890)
Lapse in statute of limitations ............................ (782) (331) —
Gross unrecognized tax benefits at end of the year ............ $23,641 $21,254 $ 11,223
We recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of
January 1, 2011, the total accrual for interest and penalties on our unrecognized tax benefits is $3,006.
We conduct business globally and, as a result, we and/or one or more of our 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, we are subject to examination by taxing authorities in many of the jurisdictions in which we operate. In the
U.S., we concluded our IRS federal income tax audit for tax years 2004 and 2005 during the third quarter of 2009,
effectively closing all years to IRS audit up through 2005. Based on the conclusion of the IRS audit, we reversed tax
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INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)