Symantec 2011 Annual Report Download - page 171

2011. This gross liability is reduced by offsetting tax benefits associated with the correlative effects of potential
transfer pricing adjustments, interest deductions, and state income taxes, as well as payments made to date.
Of the total unrecognized tax benefits at April 1, 2011, $516 million, if recognized, would favorably affect the
Company’s effective tax rate, while $11 million would affect the cumulative translation adjustments. However, one
or more of these unrecognized tax benefits could be subject to a valuation allowance if and when recognized in a
future period, which could impact the timing of any related effective tax rate benefit.
Our policy to include interest and penalties related to gross unrecognized tax benefits within our provision for
income taxes did not change upon the adoption of the new authoritative guidance on income taxes. At April 1, 2011,
before any tax benefits, we had $91 million of accrued interest and accrued penalties on unrecognized tax benefits.
Interest included in our provision for income taxes was approximately $6 million for the year ended April 1, 2011. If
the accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced in the period
that such determination is made, and reflected as a reduction of the overall income tax provision.
We file income tax returns in the U.S. on a federal basis and in many U.S. state and foreign jurisdictions. Our
two most significant tax jurisdictions are the U.S. and Ireland. Our tax filings remain subject to examination by
applicable tax authorities for a certain length of time following the tax year to which those filings relate. Our 2002
through 2009 tax years remain subject to examination by the Internal Revenue Service (“IRS”) for U.S. federal tax
purposes, and our 2006 through 2009 fiscal years remain subject to examination by the appropriate governmental
agencies for Irish tax purposes. Other significant jurisdictions include California, Japan, the UK and India. As of
April 1, 2011, we are in appeals with the IRS regarding Veritas U.S. federal income taxes for the 2002 through 2005
tax years, and under examination regarding Symantec U.S. federal income taxes for the fiscal years 2005 through
2008 tax years. In addition, we are under examination by the California Franchise Tax Board for the Symantec
California income taxes for the 2005 through 2006 tax years. We are also under audit by the Indian income tax
authorities for fiscal years 2006 through 2007.
On March 29, 2006, we received a Notice of Deficiency from the IRS claiming that we owe $867 million of
additional taxes, excluding interest and penalties, for the 2000 and 2001 tax years based on an audit of Veritas. On
June 26, 2006, we filed a petition with the U.S. Tax Court protesting the IRS claim for such additional taxes. During
July 2008, we completed the trial phase of the Tax Court case, which dealt with the remaining issue covered in the
assessment. At trial, the IRS changed its position with respect to this remaining issue, which decreased the
remaining amount at issue from $832 million to $545 million, excluding interest.
On December 10, 2009, the U.S. Tax Court issued its opinion, finding that our transfer pricing methodology, with
appropriate adjustments, was the best method for assessing the value of the transaction at issue between Veritas and its
offshore subsidiary. The Tax Court judge provided guidance as to how adjustments would be made to correct the
application of the method used by Veritas. We remeasured and decreased our liability for unrecognized tax benefits
accordingly, resulting in a $79 million tax benefit in the third quarter of fiscal 2010. In June 2010, we reached an
agreement with the IRS concerning the amount of the adjustment related to the U.S. Tax Court decision. As a result of
the agreement, we further reduced our liability for unrecognized tax benefits, resulting in an additional $39 million tax
benefit in the first quarter of fiscal 2011. In March 2011, we reached agreement with Irish Revenue concerning
compensating adjustments arising from this matter, resulting in an additional $10 million tax benefit in the fourth
quarter of fiscal 2011. This matter has now been closed and no further adjustments to the accrued liability are warranted.
On December 2, 2009, we received a Revenue Agent’s Report from the IRS for the Veritas 2002 through 2005 tax
years assessing additional taxes due. We agree with $30 million of the tax assessment, excluding interest, but will contest
the other $80 million of tax assessed and all penalties. The unagreed issues concern transfer pricing matters comparable
to the one that was resolved in our favor in the Veritas v. Commissioner Tax Court decision. On January 15, 2010, we filed
a protest with the IRS in connection with the $80 million of tax assessed. On September 28, 2010, the case was formally
accepted into the IRS Appeals process for consideration. This matter remains outstanding.
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SYMANTEC CORPORATION
Notes to Consolidated Financial Statements — (Continued)