Nordstrom 2010 Annual Report Download - page 65

Nordstrom, Inc. and subsidiaries 57
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
In 2009 and 2008, the IRS completed its routine examination of our federal filings for the 2007 and 2002 through 2006 years, respectively.
As a result of adjustments identified in the IRS examinations and revisions of estimates, we increased our deferred tax assets, which resulted
in a reduction in our effective tax rate in 2009 and 2008.
The major components of deferred tax assets and liabilities are as follows:
A reconciliation of the beginning and ending amount of unrecognized tax benefits for 2010, 2009 and 2008 is as follows:
At the end of 2010, 2009 and 2008, $22, $25 and $10 of the ending gross unrecognized tax benefit balance relates to deferred items which,
if recognized, would not impact the effective tax rate.
Our income tax expense included $5 in 2010 and $2 in each of 2009 and 2008 of tax-related interest and penalties. At the end of 2010, 2009 and 2008,
our liability for interest and penalties was $11, $7 and $6.
We file income tax returns in federal and various state and local jurisdictions. With few exceptions, we are no longer subject to federal, state and
local, or non-U.S. income tax examinations for years before 2001. The federal tax return for 2008 is under concurrent year processing (accelerated
audits), which is expected to be completed in 2011. We also currently have an open audit in France for the years 2001 through 2004, related to our
Façonnable business which we sold in 2007. Unrecognized tax benefits related to federal, state and foreign tax positions may decrease by $15 by
January 28, 2012, subject to the completion of examinations and the expiration of various statutes of limitations.
January 29, 2011 January 30, 2010
Compensation and benefits accruals $146 $123
Accrued expenses 75 67
Merchandise inventories 25 24
Land, buildings and equipment basis and
depreciation differences – 13
Gift cards and gift certificates 18 18
Loyalty reward certificates 17 12
Allowance for credit losses 56 74
Federal benefit of state taxes 9 11
Other 14 11
Total deferred tax assets 360 353
Land, buildings and equipment basis and
depreciation differences (4) –
Total deferred tax liabilities (4) –
Net deferred tax assets $356 $353
Fiscal year 2010 2009 2008
Unrecognized tax benefit at beginning of year $43 $28 $27
Gross increase to tax positions in prior periods 3 18 2
Gross decrease to tax positions in prior periods (3) (3) (1)
Gross increase to tax positions in current period 3 3 4
Lapse of statute – – (1)
Settlements (3) (3) (3)
Unrecognized tax benefit at end of year $43 $43 $28