Avnet 2009 Annual Report Download - page 63

Table of Contents
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of the first day of fiscal 2008, the Company adopted a tax accounting standard which 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 the tax accounting standard, 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 the tax accounting standard resulted in no cumulative adjustment to retained earnings in fiscal 2008. In addition,
consistent with the provisions of the standard, 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 have favorably impacted the effective tax rate if recognized, and the
remaining balance would reverse through either goodwill or deferred tax assets. 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 June 27, 2009, unrecognized tax benefits were $135,891,000, of which approximately
$87,468,000, if recognized, would favorably impact the effective tax rate, and the remaining balance would be
substantially offset by valuation allowances.
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 income tax expense. This policy did not change as a result
of the tax accounting standard adoption. The accrual for unrecognized tax benefits included accrued interest expense
and penalties of $12,476,000, $12,303,000 and $12,601,000, net of applicable state tax benefit, as of the end of fiscal
2009, fiscal 2008 and as of the date of adoption, respectively.
The significant components of deferred tax assets and liabilities, included primarily in “other assets” on the
consolidated balance sheets, are as follows:
As of June 27, 2009, the Company had foreign net operating loss carry-forwards of approximately
$1,199,515,000, approximately $256,408,000 of which have expiration dates ranging from fiscal 2010 to 2027 and
the remaining $943,107,000 of which have no expiration date. Of the $256,408,000 of foreign net operating loss
carryforwards, $29,553,000 will expire during fiscal 2010 and 2011, 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.
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June 27,
June 28,
2009
2008
(Thousands)
Deferred tax assets:
Inventory valuation
$
6,002
$
9,103
Accounts receivable valuation
20,747
14,418
Federal, state and foreign tax loss carry
-
forwards
396,933
419,642
Depreciation and amortization of property, plant and equipment
—
6,794
Various accrued liabilities and other
83,259
2,403
506,941
452,360
Less
—
valuation allowance
(315,020
)
(344,034
)
191,921
108,326
Deferred tax liabilities
(24,447
)
—
Net deferred tax assets
$
167,474
$
108,326