LensCrafters 2008 Annual Report Download - page 78

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>76 |ANNUAL REPORT 2008
practicable to determine the amount of income tax liability that would result had such earnings actually
been distributed. In connection with the 2008 earnings of certain subsidiaries, the Company has provided
for an accrual for income taxes related to declared dividends of earnings.
At December 31, 2008, a US subsidiary of the Company had Federal net operating loss carry-forwards
(NOLs) of approximately Euro 97.6 million which may be used against income generated by certain
subsidiary groups. Substantially all of the NOLs begin expiring in 2019. Approximately Euro 231.1
thousand and Euro 513.0 thousand of these NOLs were used in 2008 and 2007, respectively. The use of the
NOL is limited due to restrictions imposed by U.S. tax rules governing utilization of loss carry-forwards
following changes in ownership. None of the net operating losses expired in 2008, 2007 or 2006. As of
December 31, 2008, such US subsidiary of the Company had various state net operating loss carry-forwards
(SNOLs), associated with individual states within the United States of America totaling approximately Euro
8.0 million. These SNOLs begin expiring in 2009. Due to the foreign operations of the US subsidiary, as of
December 31, 2008, such US subsidiary of the Company has approximately Euro 4.1 million and Euro 1.9
million of non US net operating losses and foreign tax credit carry-forwards, respectively. These foreign
NOLs and foreign tax credits will begin to expirein 2012 and 2016, respectively.
As of December 31, 2008 and 2007, the Company has recorded an aggregate valuation allowance of Euro
24.1 million and Euro27.1 million, respectively, against deferred tax assets as it is more likely than not that
the above deferred income tax assets will not be fully utilized in future periods. The amount of valuation
allowance that would be allocated directly to capital in future periods, if reversed, is not material.
Areconciliation of the amount of unrecognized tax benefits is as follows (amounts in thousands of Euro):
Balance - January1, 2007 54,089
Gross increase - acquisition of Oakley 14,176
Gross increase - tax positions in prior period 5,018
Gross decrease - tax positions in prior period (7,473)
Gross increase - tax positions in current period 5,796
Settlements (2,799)
Lapse of statute of limitations (8,851)
Change in exchange rates (3,365)
Balance - December 31, 2007 56,591
Gross increase - tax positions in prior period 4,910
Gross decrease - tax positions in prior period (9,356)
Gross increase - tax positions in current period 13,139
Settlements (6,756)
Lapse of statute of limitations (2,296)
Change in exchange rates 1,901
Balance - December 31, 2008 58,133
Included in the balance of unrecognized tax benefits at December 31, 2008 and December 31, 2007, are
Euro39.1 million and Euro39.9 million of tax benefits that, if recognized, would affect the effective tax rate.
The Group does not anticipate the unrecognized tax benefits to change significantly during 2009.
The Group recognizes interest accrued related to unrecognized tax benefits and penalties as income tax