MasterCard 2009 Annual Report Download - page 127

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except percent and per share data)
Deferred Taxes
Deferred tax assets and liabilities represent the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities. The net deferred tax asset at
December 31 was comprised of the following:
Assets (Liabilities)
2009 2008
Current Non-current Current Non-current
Accrued liabilities (including litigation settlements) ......... $240,219 $113,845 $268,376 $386,608
Deferred compensation and benefits ...................... 19,769 50,500 5,670 72,163
Stock based compensation ............................. — 59,169 — 50,621
Intangible assets ..................................... — (52,126) — (49,476)
Property, plant and equipment .......................... — (63,290) — (23,406)
State taxes and other credits ............................ 9,244 54,178 21,513 31,589
Other items ......................................... (25,671) 33,937 (11,764) 29,760
Valuation allowance .................................. — (11,704) — (4,810)
$243,561 $184,509 $283,795 $493,049
The net increase in the valuation allowance during the year was $6,894. The 2009 valuation allowance
relates to the Company’s ability to recognize tax benefits associated with certain foreign net operating losses.
The recognition of these benefits is dependent upon the future taxable income in such foreign jurisdictions. The
2008 valuation allowance relates to the Company’s ability to recognize tax benefits associated with certain state
net operating losses and other deferred tax assets, and are primarily attributable to a domestic subsidiary disposed
of during the year.
On January 1, 2007, the Company adopted a new accounting pronouncement that addresses the accounting
for uncertainties in income taxes. The adoption of this new accounting pronouncement required the Company to
inventory, evaluate, and measure all uncertain tax positions taken or to be taken on tax returns, and to record
liabilities for the amount of such positions that would not be sustained, or would only partially be sustained, upon
examination by the relevant taxing authorities.
A reconciliation of beginning and ending tax benefits for the years ended December 31, is as follows:
2009 2008 2007
Beginning balance .................................... $163,185 $134,826 $109,476
Additions:
Current year tax positions .............................. 19,064 20,447 40,288
Prior year tax positions ................................. 9,914 15,654 4,544
Reductions:
Prior year tax positions, due to changes in judgments ......... (18,248) (2,613) (4,886)
Settlements with tax authorities .......................... (16,460) (1,397) (11,990)
Expired statute of limitations ............................ (11,708) (3,732) (2,606)
Ending balance ....................................... $145,747 $163,185 $134,826
The entire balance of $145,747 of unrecognized tax benefits, if recognized, would affect the effective tax
rate. There are no positions for which it is reasonably possible that the total amounts of unrecognized tax benefits
will increase or decrease significantly within the next twelve months.
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