AMD 2007 Annual Report Download - page 121

Table of Contents
A reconciliation of the gross unrecognized tax benefits is as follows:
(millions)
Balance at January 1, 2007 $ 149
Increases for tax positions taken in prior years 17
Decreases for tax positions taken in prior years (14)
Increases for tax positions taken in the current year 14
Decreases for tax positions taken in the current year —
Decreases for settlements with taxing authorities (14)
Decreases for lapsing of the statute of limitations (3)
Balance at December 29, 2007 $ 149
The amount of unrecognized tax benefits that would impact the effective tax rate was $28 million and $19 million as of January 1, 2007 and December 29,
2007, respectively. The recognition of the remaining unrecognized tax benefits would be reported as an adjustment to goodwill to the extent of pre-acquisition
unrecognized tax benefits or would be offset by a change in valuation allowance.
The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits as interest expense and income tax expense,
respectively. As of the date of adoption, the Company had accrued interest and penalties related to unrecognized tax benefits of $21 million and $38 million,
respectively. As of December 29, 2007, the Company had accrued interest and penalties related to unrecognized tax benefits of $9 million and $36 million,
respectively.
The Company recorded net interest expense of $3 million in its income statement and a reduction of $15 million of interest was offset to goodwill in the
current year. The Company recorded $2 million net penalty expense in its income statement and a reduction of $4 million of penalties was offset to goodwill in
the current year. The reductions of interest and penalties that were offset to goodwill were related to the expiration of the statutes of limitations in certain foreign
jurisdictions.
During the 12 months beginning December 30, 2007, the Company expects to reduce its unrecognized tax benefits by approximately $43 million primarily
from the expiration of certain statutes of limitation and audit resolutions. The Company does not believe it is reasonably possible that other unrecognized tax
benefits will materially change in the next 12 months. However, the Company notes that the resolution and/or closure on open audits is highly uncertain.
As of December 29, 2007, the Canadian Revenue Agency, or CRA, is auditing ATI for the years 2000—2004. The audit has been completed and is
currently in the review process. As of December 29, 2007, the U.S. Internal Revenue Service is not auditing AMD; however, an IRS audit of AMD’s tax years
2004 and 2005 is scheduled to commence in March 2008. AMD and its subsidiaries have several foreign, foreign provincial, and U.S. state audits in process at
any one point in time. The Company has provided for uncertain tax positions that require a FIN 48 liability.
As a result of the application of FIN 48, the Company has recognized $61 million of current and long-term deferred tax assets, previously under a
valuation allowance with $61 million of liabilities for unrecognized tax benefits as of December 29, 2007.
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Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008