Pizza Hut 2010 Annual Report Download - page 206

109
At December 25, 2010, the Company has foreign operating and capital loss carryforwards of $632 million and U.S. state
operating loss carryforwards of $1.7 billion. These losses are being carried forward in jurisdictions where we are
permitted to use tax losses from prior periods to reduce future taxable income and will expire as follows:
Year of Expiration
2011 2012-2015 2016-2030 Indefinitely Total
Foreign $ 4 $ 65 $ 142 $ 421 $ 632
U.S. state 12 88 1,590 - 1,690
$ 16 $ 153 $ 1,732 $ 421 $ 2,322
In addition, tax credits of $5 million are available to reduce certain U.S. state liabilities, all of which may be carried
forward indefinitely.
We recognize, in the financial statements, the benefit of positions taken or expected to be taken in tax returns in the
financial statements when it is more likely than not (i.e. a likelihood of more than fifty percent) that the position would be
sustained upon examination by tax authorities. A recognized tax position is measured at the largest amount of benefit that
is greater than fifty percent likely of being realized upon settlement.
The Company had $308 million and $301 million of unrecognized tax benefits at December 25, 2010 and December 26,
2009, respectively, $227 million and $259 million of which, if recognized, would affect the 2010 and 2009 effective
income tax rates, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:
2010 2009
Be
g
innin
g
of Yea
r
$
301 $ 296
Additions on tax
p
ositions - current
y
ear 45 48
Additions for tax
p
ositions -
p
rior
y
ears 35 59
Reductions for tax
p
ositions -
p
rior
y
ears
(
19
)
(
68
)
Reductions for settlements
(
41
)
(
33
)
Reductions due to statute ex
p
iration
(
10
)
(
6
)
Forei
g
n currenc
y
translation ad
j
ustment
(
3
)
5
End of Yea
r
$
308 $ 301
The Company believes it is reasonably possible its unrecognized tax benefits may decrease by approximately $92 million
in the next 12 months, of which each position is individually insignificant, including approximately $50 million, of which,
if recognized upon audit settlement or statute expiration, would affect the 2011 effective tax rate.
The Company’s income tax returns are subject to examination in the U.S. federal jurisdiction and numerous foreign
jurisdictions. The following table summarizes our major jurisdictions and the tax years that are either currently under
audit or remain open and subject to examination:
Jurisdiction Open Tax Years
U.S. Federal 1999 – 2010
China 2007 – 2010
United Kingdom 2003 – 2010
Mexico 2001 – 2010
Australia 2006 - 2010
Form 10-K