Vistaprint 2012 Annual Report Download - page 82

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We conduct business in a number of tax jurisdictions and, as such, are required to file income tax returns in
multiple jurisdictions globally. Generally, the years 2005 through 2011 remain open for examination by the tax
authorities.
Two of our subsidiaries, Vistaprint Limited (domiciled in Bermuda) and Vistaprint USA, Incorporated are
currently under income tax audit in the U.S. by the Internal Revenue Service (“IRS”). While we have not yet
received a Revenue Agent's Report (“RAR”) typically issued at the conclusion of an IRS audit, we have received a
Notice of Proposed Adjustment (“NOPA”) from the IRS reflecting proposed audit adjustments to Vistaprint Limited
for the 2007 - 2009 tax years. On June 11, 2012, we signed and returned the NOPA stating our formal disagreement
with the IRS' facts and technical conclusions presented in the NOPA, and as a result, we anticipate the near-term
receipt of a RAR. The issue in dispute is the imposition of U.S. federal income tax on effectively connected income
associated with the IRS' assertion that Vistaprint Limited has a U.S. Trade or Business. Vistaprint Limited has filed
timely, protective tax returns for all years under examination. Based on the technical merits of this matter, we
believe that the Company's tax positions will be sustained. We plan to pursue all administrative and, if necessary,
judicial remedies with respect to this matter.
In April 2011, Vistaprint USA Incorporated received an RAR for tax years 2007 - 2009 from the IRS that
included one unagreed issue which was included in a formal protest submitted for consideration to the Appellate
Division. Upon review of this protest and as a result of additional discussion with the field examination team,
agreement was reached during the quarter ended June 30, 2012 that we expect will conclude this audit. We have
adjusted our income tax reserve accordingly.
One of our Canadian subsidiaries, Vistaprint North American Services Corp., is currently under federal
income tax examination in Canada for tax years 2005 and 2006. The Canada Revenue Agency (“CRA”) has notified
us that they propose to reassess tax year 2006, adjusting the transfer price for the contract printing services
provided to Vistaprint Limited. Upon receipt of the Notice of Reassessment, we will file a Notice of Objection to have
our position heard before Canadian Appeals. Based on the technical merits of this matter, we believe that the
Company's tax position will be sustained.
Lastly, both Vistaprint USA, Incorporated and Vistaprint Limited are currently under income tax audit by the
Massachusetts Department of Revenue. The tax years under examination are 2005 - 2008 and 2005 - 2011,
respectively. These audits are still at the level of the field examination phase.
We believe that our income tax reserves associated with these matters are adequate as the positions
reported on our tax returns will be sustained on their technical merits. However, final resolution is uncertain and
there is a possibility that final resolution could have a material impact on our financial condition, results of
operations or cash flows.
12. Segment Information
During the first quarter of fiscal 2011, we changed our reportable segments to align with how operating
results are reported internally to the Chief Executive Officer, who constitutes our Chief Operating Decision Maker
(“CODM”) for purposes of making decisions about how to allocate resources and assess performance. Beginning
July 1, 2010, the CODM reviews revenue and income or loss from operations based on three geographic operating
segments: North America, Europe and Asia Pacific.
The costs associated with shared central functions are not allocated to the reporting segments and instead
are reported and disclosed under the caption “Corporate and global functions,” which includes expenses related to
corporate support functions, software and manufacturing engineering, and the global component of our IT
operations and customer service, sales and design support. We do not allocate non-operating income to our
segment results. There are no internal revenue transactions between our reporting segments and all intersegment
transfers are recorded at cost for presentation to the CODM, for example, products manufactured by our Venlo, the
Netherlands facility for the Asia-Pacific segment; therefore, there is no intercompany profit or loss recognized on
these transactions. At this time, we do not allocate support costs across operating segments or corporate and global
functions, which may limit the comparability of income from operations by segment.