Neiman Marcus 2013 Annual Report Download - page 123

Table of Contents
Significant components of our net deferred income tax asset (liability) are as follows:
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Deferred income tax assets:
Accruals and reserves
$ 32,675
$ 25,909
Employee benefits
162,748
128,225
Other
30,316
20,298
Total deferred tax assets
$ 225,739
$ 174,432
Deferred income tax liabilities:
Inventory
$ (6,312)
$ (8,110)
Depreciation and amortization
(272,796)
(69,167)
Intangible assets
(1,405,933)
(696,056)
Other
(41,725)
(12,835)
Total deferred tax liabilities
(1,726,766)
(786,168)
Net deferred income tax liability
$ (1,501,027)
$ (611,736)
Net deferred income tax asset (liability):
Current
$ 39,049
$ 27,645
Non-current
(1,540,076)
(639,381)
Total
$ (1,501,027)
$ (611,736)
The net deferred tax liability of $1,501.0 million at August 2, 2014 increased from $611.7 million at August 3, 2013. This increase was comprised
primarily of 1) $930.5 million increase in deferred tax liabilities related to purchase accounting adjustments and 2) $41.2 million increase in deferred tax
assets related to employee benefits and other items. We believe it is more likely than not that we will realize the benefits of our recorded deferred tax assets.
At August 2, 2014, the gross amount of unrecognized tax benefits was $2.5 million, $1.7 million of which would impact our effective tax rate, if
recognized. We classify interest and penalties as a component of income tax expense and our liability for accrued interest and penalties was $5.1 million at
August 2, 2014 and $5.5 million at August 3, 2013. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
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Balance at beginning of fiscal year
$ 3,461
$ 3,564
Gross amount of decreases for prior year tax positions
(1,072)
(281)
Gross amount of increases for current year tax positions
154
178
Balance at ending of fiscal year
$ 2,543
$ 3,461
We file income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. During the second quarter of fiscal year 2013, the
Internal Revenue Service (IRS) began its audit of our fiscal year 2010 and 2011 federal income tax returns and closed its audit of our fiscal year 2008 and
2009 income tax returns. During the second quarter of fiscal year 2014, the IRS began its audit of our fiscal year 2012 federal income tax return. With respect
to state and local jurisdictions, with limited exceptions, the Company and its subsidiaries are no longer subject to income tax audits for fiscal years before
2009. We believe our recorded tax liabilities as of August 2, 2014 are sufficient to cover any potential assessments to be made by the IRS or other taxing
authorities upon the completion of their examinations and we will continue to review our recorded tax liabilities for potential audit assessments based upon
subsequent events, new information and future circumstances. We believe it is reasonably possible that additional adjustments in the amounts of our
unrecognized tax benefits could occur within the next twelve months as a result of settlements with tax authorities or expiration of statutes of limitation. At
this time, we do not believe such adjustments will have a material impact on our Consolidated Financial Statements.
Subsequent to the Acquisition, Parent and its subsidiaries, including the Company, will file U.S. federal income taxes as a consolidated group. The
Company has elected to be treated as a corporation for U.S. federal income tax purposes and all operations of Parent are conducted through the Company and
its subsidiaries. Income taxes are presented as if the Company
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