Plantronics 2011 Annual Report Download - page 84

In fiscal 2010, the Company established a valuation allowance of $1.4 million. Of this allowance, $0.8 million 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; this allowance was subsequently released in fiscal 2011. The remaining $0.6 million of the 2010
valuation allowance was 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; in fiscal 2011, this valuation allowance was increased to $2.5 million.
Also in fiscal 2011, the Company recorded a valuation allowance of $2.8 million which is attributable to research incentives of a
foreign subsidiary where utilization of the incentive is uncertain.
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, 2011, 2010 and 2009, the Company had $10.5 million, $11.2 million and $11.1 million,
respectively, of unrecognized tax benefits. The unrecognized tax benefits as of the end of fiscal 2011 would favorably impact the
effective tax rate in future periods if recognized.
A reconciliation of the change in the amount of gross unrecognized income tax benefits for the periods is as follows:
(in thousands)
Balance at beginning of period
Increase (decrease) of unrecognized tax benefits related to prior years
Increase of unrecognized tax benefits related to the current year
Reductions to unrecognized tax benefits related to lapse of applicable statute of
limitations
Balance at end of period
March 31,
2011
$ 11,201
(960)
2,185
(1,968)
$ 10,458
2010
$ 11,090
100
2,016
(2,005)
$ 11,201
2009
$ 12,436
(155)
2,205
(3,396)
$ 11,090
The Company's continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense.
The interest related to unrecognized tax benefits as of March 31, 2011 and 2010 is approximately $1.7 million, compared to $1.6
million as of fiscal 2009. No penalties have been accrued.
Although the timing and outcome of income tax audits is highly uncertain, it is possible that certain unrecognized tax benefits
may be reduced as a result of the lapse of the applicable statutes of limitations in federal, state, and foreign jurisdictions within
the next twelve months. Currently, the Company cannot reasonably estimate the amount of reductions, if any, during the next
twelve months. Any such reduction could be impacted by other changes in unrecognized tax benefits.
The Company and its subsidiaries are subject to taxation in various foreign and state jurisdictions as well as in the U.S. The
Company is no longer subject to U.S. federal tax examinations by tax authorities for tax years prior to 2008. The Company is
under examination by the California Franchise Tax Board for its 2007 and 2008 tax years. Foreign income tax matters for material
tax jurisdictions have been concluded for tax years prior to fiscal 2005, except for the United Kingdom which has been concluded
for tax years prior to fiscal 2009.
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