Radio Shack 2010 Annual Report Download - page 71

61
The tax effect of cumulative temporary differences that
gave rise to the deferred tax assets and liabilities were as
follows:
December 31,
(In millions) 2010 2009
Deferred tax assets:
Depreciation and amortization $ 16.6 $ 22.9
Insurance reserves 15.5 18.0
Deferred compensation 13.7 13.6
Deferred revenue 13.6 7.9
Reserve for estimated
wireless service deactivations 12.0 14.1
Indirect effect of unrecognized
tax benefits 10.1 10.1
Accrued average rent 8.5 8.7
Convertible debt original issue
discount 1.9 2.5
Other 36.4 42.7
Total deferred tax assets 128.3 140.5
Deferred tax liabilities:
Deferred taxes on foreign
operations 6.6 6.2
Other 14.4 12.4
Total deferred tax liabilities 21.0 18.6
Net deferred tax assets $107.3 $ 121.9
Deferred tax assets and liabilities were included in the
Consolidated Balance Sheets as follows:
December 31,
(In millions) 2010 2009
Other current assets $ 61.4 $ 68.8
Other non-current assets 45.9 53.1
Net deferred tax assets $ 107.3 $ 121.9
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, 2010
or 2009. We have not recorded deferred U.S. income taxes
or foreign withholding taxes on temporary differences
resulting from earnings for certain foreign subsidiaries that
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 were not material to the financial
statements.
A reconciliation of the consolidated liability for gross
unrecognized income tax benefits (excluding interest) from
January 1, 2008, to December 31, 2010, is as follows:
(In millions) 2010 2009 2008
Balance at beginning of year $ 26.5
$ 38.1
$ 45.6
Increases related to
prior period tax positions -- -- 1.5
Decreases related to
prior period tax positions (0.4)
(5.5)
(2.8)
Increases related to
current period tax positions
1.7 1.9 4.6
Settlements (1.1)
(7.2)
(8.8)
Lapse in applicable
statute of limitations (0.8)
(0.8)
(2.0)
Balance at end of year $ 25.9 $ 26.5 $ 38.1
The amount of net unrecognized tax benefits that, if
recognized, would affect the effective tax rate as of
December 31, 2010, was $20.1 million.
We recognize accrued interest and penalties associated
with uncertain tax positions as part of the tax provision. As
of December 31, 2010 and 2009, we had $10.8 million and
$10.1 million, respectively, of accrued interest expense
associated with uncertain tax positions. Income tax
expense included interest associated with uncertain tax
positions of $1.8 million, $3.7 million, and $5.5 million, in
2010, 2009, and 2008, respectively.
We do not expect significant changes in unrecognized tax
benefit liabilities over the next twelve months. Our
unrecognized tax benefit liabilities are classified in other
non-current liabilities on the Consolidated Balance Sheets
as of December 31, 2010.
RadioShack Corporation and its U.S. subsidiaries join in the
filing of a U.S. federal consolidated income tax return. The
U.S. federal statute of limitations is closed for all years prior
to 2004. Foreign and U.S. state jurisdictions have statutes
of limitations generally ranging from 3 to 5 years. Our tax
returns are currently under examination in various federal,
state and foreign jurisdictions. While one or more of these
examinations may be concluded within the next twelve
months, we do not expect this to have a significant effect on
our results of operations or financial position. Our effective
tax rate for future periods may be affected by the settlement
of tax controversies or by the expiration of the statute of
limitations for periods for which a liability has been
established.