Logitech 2014 Annual Report Download - page 273

LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Deferred tax assets relating to tax benefits of employee stock grants have been reduced to reflect settlement
activity in fiscal years 2014 and 2013. Settlement activity of grants in fiscal years 2014 and 2013 resulted in a
“shortfall” in which tax deductions were less than previously recorded share-based compensation expense. The
Company recorded a shortfall to equity of $2.8 million and $4.6 million, respectively, in fiscal years 2014 and 2013.
As of March 31, 2014, the Company had foreign net operating loss and tax credit carryforwards for income
tax purposes of $196.0 million and $35.7 million, respectively, of which $136.2 million of the net operating loss
carryforwards and $22.7 million of the tax credit carryforwards, if realized, will be credited to equity since they
have not met the applicable realization criteria. Unused net operating loss carryforwards will expire at various dates
in fiscal years 2016 to 2034. Certain net operating loss carryforwards in the United States relate to acquisitions and,
as a result, are limited in the amount that can be utilized in any one year. The tax credit carryforwards will begin
to expire in fiscal year 2019.
As of March 31, 2014, the Company had capital loss carryforwards of $4.6 million. The loss will begin to
expire in fiscal year 2016.
Swiss income taxes and non-Swiss withholding taxes associated with the repatriation of earnings or for
other temporary differences related to investments in non-Swiss subsidiaries have not been provided for, as the
Company intends to reinvest the earnings of such subsidiaries indefinitely or the Company has concluded that
no additional tax liability would arise on the distribution of such earnings. If these earnings were distributed to
Switzerland in the form of dividends or otherwise, or if the shares of the relevant non-Swiss subsidiaries were
sold or otherwise transferred, the Company may be subject to additional Swiss income taxes and non-Swiss
withholding taxes. As of March 31, 2014, the cumulative amount of unremitted earnings of non-Swiss subsidiaries
was $157.4 million. Determination of the amount of unrecognized deferred income tax liability related to these
earnings is not practicable.
The Company follows a two-step approach to recognizing and measuring uncertain tax positions. The first
step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates
that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or
litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than
50% likely of being realized upon ultimate settlement.
As of March 31, 2014 and March 31, 2013, the total amount of unrecognized tax benefits due to uncertain tax
positions was $91.0 million and $95.4 million, respectively, of which $86.1 million and $90.3 million would affect
the effective income tax rate if recognized, respectively.
As of March 31, 2014, the Company had $93.1 million in non-current income taxes payable and $0.3 million
in current income taxes payable, including interest and penalties, related to our income tax liability for uncertain
tax positions. As of March 31, 2013, the Company had $98.8 million in non-current income taxes payable.
Note 7 — Income Taxes (Continued)
ANNUAl REPORT
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