DSW 2009 Annual Report Download - page 66

January 30,
2010
January 31,
2009
(In thousands)
Deferred tax assets:
Basis differences in inventory . . .............................. $ 5,314 $ 4,074
Construction and tenant allowances ............................ 4,178 2,335
Accrued rent ............................................. 12,529 12,541
Stock-based compensation — restricted stock and director stock units . . . 2,406 1,876
Accrued expenses ......................................... 5,209 3,635
Stock-based compensation — non-qualified stock options ............ 4,443 3,693
Benefit from uncertain tax positions............................ 9,015 756
Unredeemed gift cards ..................................... 1,749 1,202
Auction rate securities impairment ............................. 1,370 708
Other .................................................. 4,335 2,558
50,548 33,378
Deferred tax liabilities:
Prepaid expenses .......................................... (4,030) (4,773)
Basis differences in property and equipment ..................... (10,095) (4,958)
Other .................................................. (266) (257)
(14,391) (9,988)
Less: Valuation Allowance .................................... (1,370) (708)
Total — net deferred tax asset .................................. $34,787 $22,682
The valuation allowances relate to the other-than-temporary impairments and unrealized loss on availa-
ble-for-sale securities as the Company believes that it is more likely than not that the benefit will not be realized.
Uncertain Tax Positions — Effective February 4, 2007, the Company adopted accounting for uncertain tax
positions, which resulted in a charge of $0.1 million to beginning retained earnings. As of January 30, 2010,
January 31, 2009 and February 2, 2008, unrecognized tax benefits of $0.8 million, $0.9 million and $3.0 million,
respectively, of the total unrecognized tax benefits of $9.0 million, $1.3 million and $3.0 million, respectively,
would affect the Company’s effective tax rate if recognized. The following table presents the reconciliation of the
beginning and ending amount of unrecognized tax benefits as of the periods presented:
January 30,
2010
January 31,
2009
February 2,
2008
(In thousands)
Beginning Balance ................................ $1,277 $ 3,028 $ 2,004
(Decreases) — Tax Positions taken in a prior period ....... (208) (1,760) (1,123)
Increases — Tax Positions taken in the current period ...... 7,970 9 2,147
Ending Balance . . ................................ $9,039 $ 1,277 $ 3,028
While it is expected that the amount of unrecognized tax benefits will change in the next 12 months, any
changes are not expected to have a material impact on DSW’s financial position, results of operations or cash flows.
Consistent with its historical financial reporting, the Company has elected to classify interest expense related
to income tax liabilities, when applicable, as part of the interest expense in its consolidated statement of income
rather than income tax expense. The Company will continue to classify income tax penalties as part of operating
expenses in its consolidated statements of income. As of January 30, 2010 and January 31, 2009, $1.9 million and
$1.1 million, respectively, was accrued for the payment of interest and penalties.
F-22
DSW INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)