Avnet 2008 Annual Report Download - page 65

Table of Contents
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of June 28, 2008, the Company had foreign net operating loss carry-forwards of approximately
$1,148,972,000, approximately $99,627,000 of which have expiration dates ranging from fiscal 2009 to 2023 and the
remaining $1,049,345,000 of which have no expiration date. Of the $99,627,000 of foreign net operating loss
carryforwards, $20,618,000 will expire during fiscal 2009 and 2010, substantially all of which have full valuation
allowances. The carrying value of the Company’s net operating loss carry-forwards is dependent upon the
Company’s ability to generate sufficient future taxable income in certain tax jurisdictions. In addition, the Company
considers historic levels of income, expectations and risk associated with estimates of future taxable income and on-
going prudent and feasible tax planning strategies in assessing a tax valuation allowance.
At June 28, 2008 and June 30, 2007, accruals for income tax contingencies (or accruals for unrecognized tax
benefits) of $124,765,000 and $104,216,000, respectively, are included in “accrued expenses and other” and “other
long term liabilities” on the consolidated balance sheet. These contingency reserves relate to various tax matters that
result from uncertainties in the application of complex income tax regulations in the large number of global tax
jurisdictions in which the Company operates. The change to contingency reserves during fiscal 2008 is primarily due
to the recognition of transfer pricing exposures, a change to estimates for existing tax positions and favorable audit
settlements.
A reconciliation of the beginning and ending accrual balance for unrecognized tax benefits is as follows:
The evaluation of income tax positions requires management to estimate the ability of the Company to sustain
its position and estimate the final benefit to the Company. To the extent that these estimates do not reflect the actual
outcome there could be a material impact on the consolidated financial statements in the period in which the position
is settled, the statute of limitations expires or new information becomes available as the impact of these events are
recognized in the period in which they occur. It is difficult to estimate the period in which the amount of a tax
position will change as settlement may include administrative and legal proceedings whose timing the Company
cannot control. The effects of settling tax positions with tax authorities and statute expirations may significantly
impact the accrual for income tax contingencies. Within the next twelve months, management estimates that
approximately $47,000,000 of tax contingencies will be settled primarily through agreement with the tax authorities
for tax positions related to transfer pricing and valuation matters, items that are common to multinational companies.
The expected cash payment related to the settlement of these contingencies is approximately $22,500,000.
62
Balance as of June 30, 2007
$
104,216
Additions for balance sheet reclassification upon adoption of FIN 48
10,069
Balance upon FIN 48 adoption at July 1, 2007
114,285
Additions for tax positions taken in prior periods, including interest
40,081
Reductions for tax positions taken in prior periods
(26,087
)
Additions for tax positions taken in current period
16,121
Reductions relating to settlements with taxing authorities
(30,167
)
Reduction related to the lapse of statute of limitations
(624
)
Addition related to foreign currency translation
11,156
Balance as of June 28, 2008
$
124,765