Callaway 2011 Annual Report Download - page 106

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in
thousands):
2011 2010 2009
Balance at January 1 .................................................. $9,121 $15,831 $16,525
Additions based on tax positions related to the current year ............... 830 1,825 1,364
Additions for tax positions of prior years ............................. 370 110 866
Reductions for tax positions of prior years ............................ (39) (1,832) (70)
Settlement of tax audits ........................................... — (4,157) (1,842)
Reductions due to lapsed statute of limitations ......................... (407) (2,656) (1,012)
Balance at December 31 ............................................... $9,875 $ 9,121 $15,831
As of December 31, 2011, the liability for income taxes associated with uncertain tax benefits was
$9,875,000 and can be reduced by $4,310,000 of offsetting tax benefits associated with the correlative effects of
potential transfer pricing adjustments which was recorded as a long-term income tax receivable, as well as
$1,089,000 of tax benefits associated with state income taxes and other timing adjustments which are recorded as
deferred income taxes pursuant to ASC Topic 740-25-6. The net amount of $4,476,000, if recognized, would
affect the Company’s financial statements and favorably affect the Company’s effective income tax rate.
The Company does expect changes in the amount of unrecognized tax benefits in the next twelve months;
however, the Company does not expect the changes to have a material impact on its results of operations or its
financial position.
The Company recognizes interest and/or penalties related to income tax matters in income tax expense. For
the years ended December 31, 2011, 2010 and 2009, the Company recognized tax expense of approximately
$242,000, and a net benefit of approximately $490,000 and $190,000, respectively, related to interest and
penalties in the provision for income taxes. As of December 31, 2011 and 2010, the Company had accrued
$890,000 and $648,000, respectively, (before income tax benefit) in long-term liabilities for the payment of
interest and penalties.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various
states and foreign jurisdictions. The Company is generally no longer subject to income tax examinations by tax
authorities in its major jurisdictions as follows:
Major Tax Jurisdiction Years No Longer Subject to Audit
U.S. federal 2007 and prior
California (U.S.) 2006 and prior
Canada 2006 and prior
Japan 2007 and prior
Korea 2008 and prior
United Kingdom 2007 and prior
As of December 31, 2011, the Company did not provide for United States income taxes or foreign
withholding taxes on a cumulative total of $97,551,000 of undistributed earnings from certain non-U.S.
subsidiaries that will be permanently reinvested outside the United States. Upon remittance, certain foreign
countries impose withholding taxes that are then available, subject to certain limitations, for use as credits against
the Company’s U.S. tax liability, if any. It is not practicable to estimate the amount of the deferred tax liability on
such unremitted earnings. Should the Company repatriate foreign earnings, the Company would have to adjust
the income tax provision in the period management determined that the Company would repatriate earnings.
Subsequent to the issuance of the consolidated financial statements for the year ended December 31, 2010,
the Company identified that it had understated its long-term deferred tax liabilities by approximately $8,967,000
in its
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