Radio Shack 2008 Annual Report Download - page 79

Deferred tax assets and liabilities were included in the consolidated balance sheets as follows:
December 31,
(In millions) 2008 2007
Other current assets $ 63.9 $ 75.4
Other non-current assets 94.6 59.7
Net deferred tax assets $ 158.5 $ 135.1
We anticipate that we will generate sufficient pre-tax income in the future to realize the full benefit of U.S.
deferred tax assets related to future deductible amounts. Accordingly, a valuation allowance was not required
at December 31, 2008 or 2007. We have not recorded deferred U.S. income taxes or foreign withholding
taxes on temporary differences resulting from earnings for certain foreign subsidiaries which are
considered permanently invested outside the United States. The cumulative amount of these earnings and
the amount of the unrecognized deferred tax liability related to these earnings was not material to the
financial statements.
We adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,”
(“FIN 48”) effective January 1, 2007. As a result of the implementation of FIN 48, we recognized a $7.2
million net decrease in unrecognized tax benefits with a corresponding increase in retained earnings. The
total effect at the time of adoption was a $19.8 million increase in our non-current deferred tax assets, a
$53.0 million decrease in income tax payable to reclassify unrecognized tax benefits to non-current
liabilities, a $65.6 million increase in our non-current liabilities representing the liability for unrecognized
tax benefits and accrued interest, and the previously mentioned $7.2 million increase to retained earnings.
As of January 1, 2007, after the implementation of FIN 48, our unrecognized tax benefits, exclusive of
accrued interest, were $49.0 million.
A reconciliation of the consolidated liability for gross unrecognized income tax benefits (excluding interest)
from January 1, 2007, to December 31, 2008, is as follows:
(In millions) 2008 2007
Balance at beginning of year $ 45.6 $ 49.0
Increases related to prior period tax positions 1.5 3.8
Decreases related to prior period tax positions (2.8) --
Increases related to current period tax positions 4.6 3.9
Settlements (8.8) (1.7)
Lapse in applicable statute of limitations (2.0) (9.4)
Balance at end of year $ 38.1 $ 45.6
The amounts of net unrecognized tax benefits that, if recognized, would impact the effective tax rate as of
December 31, 2008 and 2007, were $27.8 million and $32.8 million, respectively.
We recognize accrued interest and penalties associated with uncertain tax positions as part of the tax
provision. As of December 31, 2008 and 2007, we had $13.9 million and $14.8 million of accrued interest
expense associated with uncertain tax positions, respectively. Income tax expense for the periods ended
December 31, 2008 and 2007, included interest of $5.5 million and $4.2 million, respectively, associated
with uncertain tax positions.
On June 30, 2007, the statute of limitations expired for the taxable years ended in 1998 through 2001,
resulting in the recognition of approximately $10.0 million in tax benefits, which consisted of $7.7 million of
previously unrecognized tax benefits and $4.0 million of accrued interest, net of $1.7 million of deferred
tax assets. On October 31, 2008, the statute of limitations expired for the 2002 taxable year, resulting in
the recognition of approximately $1.7 million in tax benefits, which consisted of $1.1 million in previously
unrecognized tax benefits and $1.0 million of accrued interest, net of $0.4 million of deferred tax assets.
During 2008, we also executed a closing agreement with a state taxing authority in connection with the
examination of our state income tax returns for taxable years 2000 through 2006, resulting in an additional
payment of $11.9 million and the recognition of approximately $1.2 million in tax benefits. These tax
benefits consisted of $1.6 million and $0.3 million of previously unrecognized tax benefits and accrued
interest, respectively, and were partially reduced by the reversal of $0.7 million of deferred tax assets.
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