LensCrafters 2009 Annual Report Download - page 78

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> 76 | ANNUAL REPORT 2009
A reconciliation of the amount of unrecognized tax benefi ts is as follows (amounts in thousands of Euro):
Balance - January 1, 2008 56,591
Gross increase - tax positions in prior periods 4,910
Gross decrease - tax positions in prior periods (9,356)
Gross increase - tax position in current periods 13,139
Settlements (6,756)
Lapse of statute of limitations (2,296)
Change in exchange rates 1,901
Balance - December 31, 2008 58,133
Gross increase - tax positions in prior periods 999
Gross decrease - tax positions in prior periods (6,692)
Gross increase - tax position in current periods
Settlements (2,685)
Lapse of statute of limitations (1,261)
Change in exchange rates (1,426)
Balance - December 31, 2009 47,068
Included in the balance of unrecognized tax benefi ts at December 31, 2009 and December 31, 2008, are
Euro 29.7 million and Euro 39.1 million of tax benefi ts, respectively, that, if recognized, would affect the
effective tax rate.
The Group reasonably expects a reduction in the liability for unrecognized tax benefi ts of approximately
Euro 25.1 million within the next 12 months because of the expiration of statutes of limitations and settle-
ments of tax audits.
The Group recognizes interest accrued related to unrecognized tax benefi ts and penalties as income tax
expense. Related to the uncertain tax benefi ts noted above, the Company’s accrual for penalties and inter-
est during 2009 and 2008 was immaterial and, in total, as of December 31, 2009, the Company has recog-
nized a liability for penalties of approximately Euro 2.5 million (Euro 3.6 million as of December 31, 2008)
and interest expense of approximately Euro 8.7 million (Euro 7.5 million as of December 31, 2008).
The Group is subject to taxation in Italy and foreign jurisdictions of which only the US federal taxation is
signifi cant.
Italian companies’ taxes are subject to review pursuant to Italian law. As of December 31, 2009, tax years
from 2004 through the most recent year were open for such review. As of December 31, 2009, no Italian
companies were the subject of an Italian tax inspection.
The Group’s US federal tax years for 2005, 2006, 2007 and 2008 are subject to examination by the tax
authorities and the Company is under examination for years 2007 and 2008.