Salesforce.com 2012 Annual Report Download - page 102

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The Company had gross unrecognized tax benefits of $52.0 million and $27.5 million as of January 31,
2012 and 2011 respectively.
A reconciliation of the beginning and ending balance of total unrecognized tax benefits for fiscal years
2012, 2011, and 2010 is as follows (in thousands):
Fiscal Year Ended January 31,
2012 2011 2010
Balance as of February 1, ....................... $27,462 $22,053 $16,472
Tax positions taken in prior period:
Gross increases ........................... 10,008 41 457
Gross decreases ........................... (23) (811) (707)
Tax positions taken in current period:
Gross increases ........................... 15,965 8,047 5,401
Settlements .................................. 0 (39) (212)
Lapse of statute of limitations .................... (1,143) (1,741) 0
Currency translation effect ...................... (298) (88) 642
Balance as of January 31, ....................... $51,971 $27,462 $22,053
For fiscal year 2012, 2011 and 2010 total unrecognized tax benefits in an amount of $39.1 million, $20.4
million and $16.5 million respectively, if recognized, would reduce income tax expense and the Company’s
effective tax rate.
The Company recognizes interest accrued and penalties related to unrecognized tax benefits in the income
tax provision. The Company accrued no penalties and an immaterial amount of interest in income tax expense for
fiscal 2012, 2011 and 2010.
Tax positions for the Company and its subsidiaries are subject to income tax audits by many tax
jurisdictions throughout the world. The Company’s U.S. federal and state tax returns for all tax years since
February 1999, which was the inception of the Company, remain open to examination. Outside the U.S., the
Company operates in jurisdictions including Canada, Australia, Japan and United Kingdom. With some
exceptions, all tax years in jurisdictions outside of U.S. are generally open and could be subject to examinations,
however, in Japan and United Kingdom, the Company is no longer subject to examinations for years prior to
fiscal 2005 and 2010, respectively.
Management does not believe that it is reasonably possible that the estimates of unrecognized tax benefits
will change significantly in the next twelve months. However, when the Company effectively settles one or more
uncertain tax positions in any period, it could be material to the Company’s financial condition or cash flows, or
both, or could otherwise adversely affect the Company’s operating results.
7. Commitments
Letters of Credit
As of January 31, 2012, the Company had a total of $17.5 million in letters of credit outstanding
substantially in favor of certain landlords for office space. These letters of credit renew annually and mature at
various dates through April 2030.
Leases
The Company leases facilities space and certain fixed assets under non-cancelable operating and capital
leases with various expiration dates.
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