DSW 2010 Annual Report Download - page 67

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January 29,
2011
January 30,
2010
(In thousands)
Deferred tax assets:
Basis differences in inventory . . .............................. $ 5,917 $ 5,314
Construction and tenant allowances ............................ 3,741 4,178
Accrued rent ............................................. 12,068 12,529
Stock-based compensation — restricted stock and director stock units . . . 2,345 2,406
Accrued expenses ......................................... 6,362 5,209
Stock-based compensation — non-qualified stock options ............ 4,405 4,443
Benefit from uncertain tax positions............................ 2,129 9,015
Unredeemed gift cards ..................................... 1,387 1,749
Auction rate securities impairment ............................. 1,370
Capital loss carryforward .................................... 785
Other .................................................. 4,144 4,335
43,283 50,548
Deferred tax liabilities:
Prepaid expenses .......................................... (2,726) (4,030)
Basis differences in property and equipment ..................... (27,687) (10,095)
Other .................................................. (378) (266)
(30,791) (14,391)
Less: valuation allowance ..................................... (785) (1,370)
Total — net deferred tax asset .................................. $11,707 $ 34,787
The valuation allowances relate to capital loss carryforward and unrealized loss on available-for-sale
securities, as the Company believes that it is more likely than not that these benefits will not be realized.
Uncertain Tax Positions — As of January 29, 2011, January 30, 2010 and January 31, 2009, unrecognized tax
benefits of $0.9 million, $0.8 million and $0.9 million, respectively, of the total unrecognized tax benefits of
$2.9 million, $9.0 million and $1.3 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 29,
2011
January 30,
2010
January 31,
2009
(In thousands)
Beginning balance ............................... $9,039 $1,277 $ 3,028
(Decreases) — tax positions taken in a prior period ...... (7,666) (208) (1,760)
Increases — tax positions taken in the current period ..... 1,526 7,970 9
Ending balance ................................. $2,899 $9,039 $ 1,277
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 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
F-21
DSW INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)