Citrix 2007 Annual Report Download - page 113

CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes, on January 1, 2007. As a result of the implementation of Interpretation 48, the Company recognized an
approximate $12.4 million increase in the liability for unrecognized tax benefits, which was accounted for as a
reduction to the January 1, 2007 balance of retained earnings. A reconciliation of the beginning and ending
amount of unrecognized tax benefits is as follows (in thousands):
Balance at January 1, 2007 ........................................... $36,895
Additions (reductions) based on tax positions related to the current year . . . 1,355
Additions (reductions) for tax positions of prior years .................. —
Reductions for tax positions of prior years ........................... —
Reductions related to the expiration of statutes of limitations ............ (10,967)
Settlements ................................................... —
Balance at December 31, 2007 ........................................ $27,283
We do not expect our unrecognized tax benefits to change significantly over the next 12 months.
Included in the balance at December 31, 2007, are $0.2 million of tax positions for which the ultimate
deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of
the impact of deferred tax accounting, other that interest and penalties, the disallowance of the shorter
deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the
taxing authority to an earlier period.
The Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax
expense. During the year ended December 31, 2007, the Company did not recognize any expense related to
interest and penalties. The Company has approximately $0.1 million for the payment of interest and penalties
accrued at December 31, 2007.
On October 22, 2004, the American Jobs Creation Act (“AJCA”) was signed into law. The AJCA provides
for an 85% dividends received deduction on dividend distributions of foreign earnings to a U.S. taxpayer, if
certain conditions are met. During the second quarter of fiscal 2005, the Company completed its evaluation of the
effects of the repatriation provision of the AJCA, and the Company’s Chief Executive Officer and Board of
Directors approved its DRP under the AJCA. On September 27, 2005, the Company repatriated approximately
$503 million of certain foreign earnings, of which $500 million qualified for the 85% dividends received
deduction. During 2005, the Company recorded an estimated tax provision of approximately $24.4 million
related to the repatriation. Additionally, during 2005, the Company recorded the reversal of approximately $8.8
million for income taxes on certain foreign earnings for which a deferred tax liability had been previously
recorded. Other than the one-time repatriation provision under the AJCA, the Company does not expect to remit
earnings from its foreign subsidiaries.
12. GEOGRAPHIC INFORMATION AND SIGNIFICANT CUSTOMERS
The Company operates in a single industry segment consisting of the design, development and marketing of
technology solutions that allow applications to be delivered, supported and shared on-demand. The Company’s
revenues are derived from sales of its Citrix Delivery Center products and related technical services in the
Americas, EMEA and Asia-Pacific regions and from its online services sold by its Online Services division.
These three geographic regions and the Online Services division constitute the Company’s four reportable
segments.
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