Avnet 2008 Annual Report Download - page 63

Table of Contents
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48,
Accounting for Uncertainty in Income Taxes
— an Interpretation of FASB Statement No. 109, (“FIN 48”) on July 1,
2007, the first day of fiscal 2008. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
entity’s financial statements and prescribes that a company use a more-likely-than-not recognition threshold based
upon the technical merits of the tax position taken or expected to be taken in a tax return. To the extent a tax position
exceeds the amount of tax benefit allowed to be recognized pursuant to the provisions of FIN 48, the difference is
recorded as a liability on the balance sheet (an “unrecognized tax benefit” or “income tax contingency”) until such
time as the position either meets the criteria, or is settled due to statute expiration or effective settlement with the
taxing authority.
The adoption of FIN 48 resulted in no cumulative adjustment to retained earnings. In addition, consistent with
the provisions of FIN 48, the Company reclassified $94,460,000 of income tax liabilities from current classification
in “accrued expenses and other” on the Consolidated Balance Sheet to long-term classification in “other long-term
liabilities.”
The total amount of gross unrecognized tax benefits upon adoption was $114,285,000, of which approximately
$49,563,000 would favorably impact the effective tax rate if recognized, and the remaining balance would reverse
through either goodwill or deferred tax assets. In accordance with the Company’s accounting policy, accrued interest
and penalties, if any, related to unrecognized tax benefits are recorded as a component of tax expense. This policy did
not change as a result of the adoption of FIN 48. The Company had accrued interest expense and penalties of
$12,601,000, net of applicable state tax benefit, as of the date of adoption of FIN 48. As of June 28, 2008,
unrecognized tax benefits were $124,765,000, of which approximately $59,300,000, if recognized, would favorably
impact the effective tax rate. As of the end of fiscal 2008, the accrual for unrecognized tax benefits included
$12,303,000 of interest and penalties.
The components of the provision for income taxes are indicated in the table below. The tax provision for
deferred income taxes results from temporary differences arising principally from inventory valuation, accounts
receivable valuation, net operating losses, certain accruals and depreciation, net of any changes to the valuation
allowance.
The provision for income taxes noted above is computed based upon the split of income before income taxes
from U.S. and foreign operations. U.S. income before income taxes was $352,854,000, $253,380,000 and
60
9.
Income taxes
Years Ended
June 28,
June 30,
July 1,
2008
2007
2006
(Thousands)
Current:
Federal
$
53,350
$
34,992
$
3,483
State and local
30,361
10,685
7,016
Foreign
19,015
48,271
48,932
Total current taxes
102,726
93,948
59,431
Deferred:
Federal
54,738
49,561
48,989
State and local
(9,697
)
3,265
1,481
Foreign
62,107
46,778
1,699
Total deferred taxes
107,148
99,604
52,169
Provision for income taxes
$
209,874
$
193,552
$
111,600