Plantronics 2010 Annual Report Download - page 91

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The effective tax rate for fiscal years 2008, 2009 and 2010 differs from the statutory rate due to the impact of foreign operations taxed
at different statutory rates, income tax credits, state taxes, and other factors. The future tax rate could be impacted by a shift in the
mix of domestic and foreign income, tax treaties with foreign jurisdictions, changes in tax laws in the U.S. or internationally or a
change in estimate of future taxable income which could result in a valuation allowance being required.
Permanently reinvested foreign earnings were approximately $374.8 million at March 31, 2010. The determination of the tax liability
that would be incurred if these amounts were remitted back to the U.S. is not practical.
Deferred tax assets and liabilities represent the tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting and income tax purposes. Significant components of our deferred tax assets and liabilities as of
March 31, 2009 and 2010 are as follows:
(in thousands) 2009 2010
Accruals and other reserves $ 9,887 $ 8,316
Net operating loss carryover 3,118 2,833
Stock compensation 8,714 7,946
Other deferred tax assets 4,141 4,553
Valuation allowance (123) (1,399)
Total deferred tax assets 25,737 22,249
Deferred gains on sales of properties (2,096) (2,033)
Purchased intangibles
(
10,024
)
(
1,288
)
Unremitted earnings of certain subsidiaries (3,064) (2,486)
Fixed asset depreciation (3,949) (3,619)
Other deferred tax liabilities (2,203) (2,463)
Total deferred tax liabilities (21,336) (11,889)
Net deferred tax asset/(liabilities) $4,401 $10,360
March 31,
The Company evaluates its deferred tax assets including a determination of whether a valuation allowance is necessary based upon its
bility to utilize the assets using a more likely than not analysis. Deferred tax assets are only recorded to the extent that they are
mpany has state tax credit carryforwards of $1.9 million with no expiration provisions.
The Company established a valuation allowance of $1.1 million during fiscal 2008 related to the temporary decline in fair market
value of its ARS. The valuation allowance was recorded to Accumulated other comprehensive income. During fiscal 2009, the
decline in fair value of the ARS was treated as an other-than-temporary loss and the valuation allowance of $1.1 million was reversed.
The loss was mostly offset by the value of the Rights offer from UBS the Company accepted during fiscal 2009. The $0.1 million
valuation allowance established during fiscal 2009 for the tax effect of the net loss from the decline in value of the ARS offset by the
Rights was reversed during fiscal 2010 as a result of net gains during the fiscal year on the value of the ARS offset by the Rights.
During fiscal 2009, the Company also established a $0.1 million valuation allowance in relation to the operating losses of one of its
foreign subsidiaries where there is an insufficient history of earnings to support realization of the deferred tax asset. During fiscal
2010, the valuation allowance increased to $1.4 million of which $0.8 million of the allowance was established due to a change in
position for permanently reinvesting accumulated earnings of certain foreign subsidiaries where recognition of the tax benefit is
uncertain and $0.6 million is attributable to the net operating losses of two foreign subsidiaries where there is an insufficient history of
earnings to support realization of the deferred tax asset.
The impact of an uncertain income tax position on income tax expense must be recognized at the largest amount that is more-likely-
than-not to be sustained. An uncertain income tax position will not be recognized unless it has a greater than 50% likelihood of being
sustained. As of March 31, 2008, 2009 and 2010, the Company had $12.4 million, $11.1 million and $11.2 million, respectively, of
unrecognized tax benefits. The unrecognized tax benefits as of the end of fiscal 2010 would favorably impact the effective tax rate in
future periods if recognized.
a
realizable based upon past and future income. The Company has a long established earnings history with taxable income in its
carryback years and forecasted future earnings. The Company has concluded that except for the specific items discussed below, no
valuation allowance is required.
As of March 31, 2010, the Co