Banana Republic 2011 Annual Report Download - page 81

Deferred tax assets (liabilities) consist of the following:
($ in millions) January 28, 2012 January 29, 2011
Deferred tax assets:
Deferredrent ................................................................... $137 $114
Accruedpayrollandrelatedbenefits .............................................. 66 53
Nondeductible accruals .......................................................... 74 59
Inventorycapitalizationandotheradjustments .................................... 65 64
Depreciation.................................................................... 18 39
State and foreign net operating losses ("NOLs") .................................... 36 35
Fair value of derivative financial instruments included in accumulated OCI ............ (5) 8
Other .......................................................................... 83 100
Totaldeferredtaxassets ............................................................. 474 472
Valuation allowance ................................................................. (39) (32)
Total deferred tax liabilities ........................................................... (15) (19)
Netdeferredtaxassets .............................................................. $420 $421
Current portion (included in other current assets) ....................................... $205 $190
Non-current portion (included in other long-term assets) ................................ 215 231
Total ............................................................................... $420 $421
As of January 28, 2012, we had approximately $56 million state and $126 million foreign NOL carryovers in multiple
taxing jurisdictions that could be utilized to reduce the tax liabilities of future years. The tax-effected NOL was
approximately $4 million for state and $32 million for foreign as of January 28, 2012. We provided a valuation
allowance of approximately $1 million and $25 million against the deferred tax asset related to the state and
foreign NOLs, respectively. The state losses expire between fiscal 2022 and fiscal 2023, approximately $84 million of
the foreign losses expire between fiscal 2012 and fiscal 2021, and $42 million of the foreign losses do not expire.
The activity related to our unrecognized tax benefits is as follows:
Fiscal Year
($ in millions) 2011 2010 2009
Balanceatbeginningoffiscalyear..................................................... $ 67 $132 $131
Increases related to current year tax positions .......................................... 10 10 1
Prior year tax positions:
Increases ....................................................................... 31 15 38
Decreases ...................................................................... (2) (74) (17)
Cashsettlements .................................................................... (2) (4) (21)
Expiration of statute of limitations .................................................... (1) (14) (6)
Foreign currency translation .......................................................... (1) 2 6
Balanceatendoffiscalyear........................................................... $102 $ 67 $132
Of the $102 million, $67 million, and $132 million of total unrecognized tax benefits as of January 28, 2012,
January 29, 2011, and January 30, 2010, respectively, approximately $25 million, $5 million, and $15 million (net of the
federal benefit on state issues), respectively, represents the amount of unrecognized tax benefits that, if
recognized, would favorably affect the effective income tax rate in future periods. During fiscal 2011 and 2009,
interest expense of $6 million and $2 million, respectively, was recognized in the Consolidated Statements of
Income relating to tax liabilities. During fiscal 2010, an interest expense reversal of $15 million was recognized in
the Consolidated Statement of Income. As of January 28, 2012 and January 29, 2011, the Company had total accrued
interest related to the unrecognized tax benefits of $29 million and $21 million, respectively. There were no accrued
penalties related to the unrecognized tax benefits as of January 28, 2012 or January 29, 2011.
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