Ross 2007 Annual Report Download - page 58

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56
Effective February 4, 2007, the Company adopted the provisions of FIN 48. As a result, the Company established a $26.3 million
reserve for unrecognized tax benefits, inclusive of $6.0 million of related interest. The reserve is classified as a long-term liability
and included in other long-term liabilities on the Company’s condensed consolidated balance sheet. Upon adoption of FIN 48,
the Company also recognized a reduction in retained earnings of $7.4 million and certain other deferred income tax assets and
liabilities were reclassified. The change in amount of unrecognized tax benefit since adoption of FIN 48 is as follows:
($000) 20071
Unrecognized tax benefit upon adoption of FIN 48 $ 56,672
Increases
Tax positions in current period 12,173
Tax positions in prior period 1,485
Decreases
Tax positions in prior periods (16,199)
Lapse of statute limitations (4,035)
Settlements (43)
Unrecognized tax benefit as of February 2, 2008 $ 50,053
1 Pursuant to FIN 48, paragraph 21, the amounts in the table above represent the gross amount of unrecognized tax benefit on the dates shown.
As of February 2, 2008, the reserve for unrecognized tax benefits is $23.2 million inclusive of $5.6 million of related interest.
The Company adopted a new tax method of accounting which reduced its reserve during the year. The Company accounts for
interest related to unrecognized tax benefits as a part of its provision for taxes on earnings. If recognized, $16.4 million would
impact the Company’s effective tax rate. The difference between the total amount of unrecognized tax benefits and the amounts
that would impact the effective tax rate relates to amounts attributable to deferred income tax assets and liabilities. These
amounts are net of federal and state income taxes.
During the next twelve months, it is reasonably possible that the statute of limitations may lapse pertaining to positions taken
by the Company in prior year tax returns. As a result, the total amount of unrecognized tax benefits may decrease, which would
reduce the provision for taxes on earnings by up to $3.0 million, net of federal tax benefits.
The Company is currently open to audit by the Internal Revenue Service under the statute of limitations for fiscal years 2005
through 2007. The Company’s state income tax returns are open to audit under the statute of limitations for fiscal years 2003
through 2007. Certain state tax returns are currently under audit by state tax authorities. The Company does not expect the
result of these audits to have a material impact on the consolidated financial statements.