Adobe 2013 Annual Report Download - page 84

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Accounting for Uncertainty in Income Taxes
During fiscal 2013 and 2012, our aggregate changes in our total gross amount of unrecognized tax benefits are summarized
as follows (in thousands):
2013 2012
Beginning balance $ 160,468 $ 163,607
Gross increases in unrecognized tax benefits – prior year tax positions 20,244 1,038
Gross increases in unrecognized tax benefits – current year tax positions 16,777 23,771
Settlements with taxing authorities (55,851)(1,754)
Lapse of statute of limitations (4,066)(25,387)
Foreign exchange gains and losses (1,474)(807)
Ending balance $ 136,098 $ 160,468
As of November 29, 2013, the combined amount of accrued interest and penalties related to tax positions taken on our tax
returns and included in non-current income taxes payable was approximately $11.4 million.
We file income tax returns in the U.S. on a federal basis and in many U.S. state and foreign jurisdictions. We are subject
to the continual examination of our income tax returns by the IRS and other domestic and foreign tax authorities. Our major tax
jurisdictions are the U.S., Ireland and California. For California, Ireland and the U.S., the earliest fiscal years open for examination
are 2005, 2006 and 2010, respectively. We regularly assess the likelihood of outcomes resulting from these examinations to
determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from the
current examinations. We believe such estimates to be reasonable; however, there can be no assurance that the final determination
of any of these examinations will not have an adverse effect on our operating results and financial position.
In July 2013, a U.S. income tax examination covering our fiscal years 2008 and 2009 was completed. Our accrued tax and
interest related to these years was $48.4 million and was previously reported in long-term income taxes payable. We settled the
tax obligation resulting from this examination with cash and income tax assets totaling $41.2 million, and the resulting $7.2 million
income tax benefit was recorded in the third quarter of fiscal 2013.
The timing of the resolution of income tax examinations is highly uncertain as are the amounts and timing of tax payments
that are part of any audit settlement process. These events could cause large fluctuations in the balance sheet classification of
current and non-current assets and liabilities. We believe that within the next 12 months, it is reasonably possible that either certain
audits will conclude or statutes of limitations on certain income tax examination periods will expire, or both. Given the uncertainties
described above, we can only determine a range of estimated potential decreases in underlying unrecognized tax benefits ranging
from $0 to approximately $5 million.
NOTE 10. RESTRUCTURING
Fiscal 2011 Restructuring Plan
In the fourth quarter of fiscal 2011, we initiated a restructuring plan consisting of reductions in workforce and the
consolidation of facilities in order to better align our resources around our Digital Media and Digital Marketing strategies.
During fiscal 2013, we continued to implement restructuring activities under this plan. Total costs incurred to date and
expected to be incurred for closing redundant facilities are $12.2 million as all facilities under this plan have been exited as of
November 29, 2013.
Other Restructuring Plans
Other restructuring plans include other Adobe plans and other plans associated with certain of our acquisitions that are
substantially complete. We continue to make cash outlays to settle obligations under these plans, however the current impact to
our Consolidated Financial Statements is not significant. Our other restructuring plans primarily consist of the 2009 Restructuring
Plan, which was implemented in the fourth quarter of fiscal 2009, in order to appropriately align our costs in connection with our
fiscal 2010 operating plan.
Table of Contents
ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)