Macy's 2008 Annual Report Download - page 79

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and
deferred tax liabilities are as follows:
January 31,
2009
February 2,
2008
(millions)
Deferred tax assets:
Post employment and postretirement benefits .................... $ 654 $ 522
Accrued liabilities accounted for on a cash basis for tax purposes .... 276 258
Long-term debt ............................................ 144 159
Unrecognized state tax benefits and accrued interest ............... 105 102
Federal operating loss carryforwards ........................... 7 14
State operating loss carryforwards ............................. 55 39
Other .................................................... 95 86
Valuation allowance ........................................ (33) (19)
Total deferred tax assets ................................. 1,303 1,161
Deferred tax liabilities:
Excess of book basis over tax basis of property and equipment ...... (1,950) (1,867)
Merchandise inventories ..................................... (442) (435)
Intangible assets ........................................... (94) (384)
Other .................................................... (158) (144)
Total deferred tax liabilities .............................. (2,644) (2,830)
Net deferred tax liability ................................. $(1,341) $(1,669)
The valuation allowance of $33 million at January 31, 2009 and $19 million at February 2, 2008 relates to
net deferred tax assets for state net operating loss carryforwards. The net change in the valuation allowance
amounted to an increase of $14 million for 2008 and a decrease of $5 million for 2007.
As of January 31, 2009, the Company had federal net operating loss carryforwards of approximately $20
million, which will expire in 2009 and state net operating loss carryforwards, net of valuation allowance, of
approximately $649 million, which will expire between 2009 and 2029.
The Company adopted the provisions of FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty
in Income Taxes - An Interpretation of FASB Statement No. 109” (“FIN 48”) on February 4, 2007, and the
adoption resulted in a net increase to accruals for uncertain tax positions of $1 million, an increase to the
beginning balance of accumulated equity of $1 million and an increase to goodwill of $2 million.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
January 31,
2009
February 2,
2008
(millions)
Balance, beginning of period ..................................... $237 $308
Additions based on tax positions related to the current year ............. 31 33
Additions for tax positions of prior years ............................ 3 11
Reductions for tax positions of prior years (including $5 million and
$18 million credited to goodwill) ................................ (21) (90)
Settlements ................................................... (2) (14)
Statute expirations (including $7 million and $6 million
credited to goodwill) .......................................... (11) (11)
Balance, end of period .......................................... $237 $237
F-31