EMC 2008 Annual Report Download - page 88

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
current liability unless it was highly probable that there would not be a payment or settlement for such identified risks for a period of at least a year. With the
adoption of FIN No. 48, we reclassified $219.3 million of income tax liabilities from current to non-current liabilities because a cash settlement of these
liabilities was not anticipated within one year of the balance sheet date.
The following is a rollforward of our gross consolidated liability for unrecognized income tax benefits for the years ended December 31, 2008 and
December 31, 2007:
2008 2007
Unrecognized tax benefits, beginning of year $206.7 $175.1
Tax positions related to current year:
Additions 62.4 54.2
Reductions — —
Tax positions related to prior years:
Additions 5.1 8.8
Reductions (40.2) (10.0)
Settlements (0.3) (4.4)
Lapses in statutes of limitations (15.2) (17.0)
Unrecognized tax benefits, end of year $218.5 $206.7
As of December 31, 2007, we had $206.7 million of remaining unrecognized tax benefits. If recognized, $156.4 million would have been recognized as a
reduction of income tax expense impacting the effective income tax rate. The remainder would have been an adjustment to goodwill of $31.3 million and to
stockholders' equity of $19.0 million.
As of December 31, 2008, we had $218.5 million of unrecognized tax benefits. If recognized, $213.0 million would be recognized as a reduction of
income tax expense impacting the effective income tax rate. The remainder would be an adjustment to stockholders' equity of $5.5 million.
We have substantially concluded all U.S. federal income tax matters for years through 2004 and are currently under audit for U.S. federal income tax for
2005 and 2006. We also have income tax audits in process in numerous state, local and international jurisdictions. In our international jurisdictions that
comprise a significant portion of our operations, the years that may be examined vary, with the earliest year being 2002. Based on the timing and outcome of
examinations of EMC, the result of the expiration of statutes of limitations for specific jurisdictions or the timing and result of ruling requests from taxing
authorities, it is reasonably possible that the related unrecognized tax benefits could change from those recorded in our statement of financial position. We
anticipate that several of these audits may be finalized within the next 12 months. Based on the status of these examinations, and the protocol of finalizing
such audits, it is not possible to estimate the impact of any amount of such changes, if any, to our previously recorded uncertain tax positions. However, it is
reasonably possible that up to $24.2 million of individually-insignificant unrecognized tax positions may be recognized within one year as a result of the lapse
of statutes of limitations and the resolution of agreements with various tax authorities.
We recognize interest expense and penalties related to income tax matters in income tax expense. For 2008, $1.3 million in net interest expense was
reversed. For 2007, $3.4 million in interest expense was recognized. There were no penalties recorded. In addition to the unrecognized tax benefits noted
above, the amounts of accrued interest at December 31, 2007 and December 31, 2008 were $35.1 million and $34.2 million, respectively.
L. Retirement Plans and Retiree Medical Benefits
401(k) Plan
EMC's Information Infrastructure business has established a deferred compensation program for certain employees that is qualified under Section 401(k)
of the Code. EMC will match pre-tax employee contributions up to 6% of eligible compensation during each pay period (subject to a $750 maximum match
each quarter). Matching contributions are
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