Dollar Tree 2013 Annual Report Download - page 57

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41
February 1,
2014
February 2,
2013
(in millions)
Deferred tax assets:
Deferred rent $ 38.2 $ 35.6
Accrued expenses 34.2 32.6
Net operating losses and credit carryforwards 19.3 14.4
Accrued compensation expense 29.5 28.2
Other 0.6 0.8
Total deferred tax assets 121.8 111.6
Valuation allowance (6.0)(4.3)
Deferred tax assets, net 115.8 107.3
Deferred tax liabilities:
Property and equipment (46.6)(32.8)
Goodwill (16.9)(15.9)
Prepaid expenses (3.7)(4.0)
Inventory (5.6)(3.8)
Total deferred tax liabilities (72.8)(56.5)
Net deferred tax asset $ 43.0 $ 50.8
A valuation allowance of $6.0 million, net of federal tax benefits, has been provided principally for certain state credit
carryforwards and net operating loss carryforwards. In assessing the realizability of deferred tax assets, the Company considers
whether it is more likely than not that some portion or all of the deferred taxes will not be realized. Based upon the availability
of carrybacks of future deductible amounts to the past two years’ taxable income and the Company's projections for future
taxable income over the periods in which the deferred tax assets are deductible, the Company believes it is more likely than not
the remaining existing deductible temporary differences will reverse during periods in which carrybacks are available or in
which the Company generates net taxable income.
The company is participating in the Internal Revenue Service (“IRS”) Compliance Assurance Program (“CAP”) for the
2013 fiscal year and has applied to participate for fiscal year 2014. This program accelerates the examination of key
transactions with the goal of resolving any issues before the tax return is filed. Our federal tax returns have been examined and
all issues have been settled through our fiscal 2012 tax year. In addition, several states completed their examination during
fiscal 2013. In general, fiscal years 2010 and forward are within the statute of limitations for state tax purposes. The statute of
limitations is still open prior to 2010 for some states.
The balance for unrecognized tax benefits at February 1, 2014, was $5.5 million. The total amount of unrecognized tax
benefits at February 1, 2014, that, if recognized, would affect the effective tax rate was $3.6 million (net of the federal tax
benefit). The following is a reconciliation of the Company’s total gross unrecognized tax benefits for the year ended
February 1, 2014:
February 1,
2014
February 2,
2013
Beginning Balance $ 5.6 $ 15.5
Additions, based on tax positions related to current year 0.2 2.5
Additions for tax positions of prior years 0.8 2.1
Reductions for tax positions of prior years (0.2) (3.1)
Settlements (0.3) (1.9)
Lapses in statutes of limitation (0.6) (9.5)
Ending balance $ 5.5 $ 5.6
During fiscal 2013, the Company accrued potential interest of $0.3 million, related to these unrecognized tax benefits. As
of February 1, 2014, the Company has recorded a liability for potential interest of $0.5 million.