Estee Lauder 2009 Annual Report Download - page 135

134 THE EST{E LAUDER COMPANIES INC.
unrecognized tax benefi ts that, if recognized, would affect
the effective tax rate was $133.4 million. The total gross
accrued interest and penalties during the fi scal years
ended June 30, 2009 and June 30, 2008 in the accompa-
nying consolidated statements of earnings were $17.2 mil-
lion and $12.0 million, respectively. The total gross
accrued interest and penalties in the accompanying con-
solidated balance sheets at June 30, 2009 and June 30,
2008 were $67.9 million and $54.0 million, respectively.
A reconciliation of the beginning and ending amount of
gross unrecognized tax benefi ts is as follows:
JUNE 30, 2009
(In millions)
Balance of gross unrecognized tax benefi ts as of
July 1, 2008 $199.0
Gross amounts of increases as a result of
tax positions taken during a prior period 75.1
Gross amounts of decreases as a result of
tax positions taken during a prior period (22.0)
Gross amounts of increases as a result of
tax positions taken during the current period 14.8
Amounts of decreases in the unrecognized
tax benefi ts relating to settlements with
taxing authorities (5.6)
Reductions to unrecognized tax benefi ts
as a result of a lapse of the applicable
statutes of limitations (2.2)
Balance of gross unrecognized tax benefi ts
as of June 30, 2009 $259.1
Included in the balance of gross unrecognized tax bene-
fi ts at June 30, 2009 are $72.6 million of tax positions for
which the ultimate deductibility is highly certain but for
which there is uncertainty about the timing of such deduct-
ibility . Because of the impact of deferred tax accounting,
As of June 30, 2009 and 2008, the Company had current
net deferred tax assets of $202.7 million and $184.6 mil-
lion, respectively, which are included in Prepaid expenses
and other current assets in the accompanying consoli-
dated balance sheets. In addition, the Company had
noncurrent net deferred tax assets of $156.0 million and
$55.3 million as of June 30, 2009 and 2008, respectively,
which are included in Other assets in the accompanying
consolidated balance sheets.
As of June 30, 2009 and 2008, certain subsidiaries had
net operating loss and other carryforwards for tax purposes
of approximately $96 million and $40 million, respectively.
With the exception of $77.4 million of net operating loss
and other carryforwards with an indefi nite carryforward
period as of June 30, 2009, these carry forwards expire at
various dates through fi scal 2029. Deferred tax assets, net
of valuation allowances, in the amount of $4.2 million and
$4.5 million as of June 30, 2009 and 2008, respectively,
have been recorded to reflect the tax benefits of the
carryforwards not utilized to date.
A full valuation allowance has been provided for those
deferred tax assets for which, in the opinion of manage-
ment, it is more-likely-than-not that the deferred tax assets
will not be realized.
Earnings before income taxes and minority interest
include amounts contributed by the Company’s inter-
national operations of approximately $674 million, $905
million and $696 million for fi scal 2009, 2008 and 2007,
respectively. A portion of these earnings are taxed in the
United States.
As of June 30, 2009 and June 30, 2008, the Company
had gross unrecognized tax benefi ts of $259.1 million
and $199.0 million, respectively. The total amount of
Signifi cant components of the Company’s deferred income tax assets and liabilities as of June 30, 2009 and 2008 were
as follows:
2009 2008
(In millions)
Deferred tax assets:
Compensation related expenses $ 84.0 $ 80.9
Inventory obsolescence and other inventory related reserves 59.5 61.5
Retirement benefi t obligations 88.1 41.9
Various accruals not currently deductible 131.3 111.6
Net operating loss, credit and other carryforwards 27.1 11.0
Unrecognized state tax benefi ts and accrued interest 45.8 41.0
Other differences between tax and fi nancial statement values 74.7 53.9
510.5 401.8
Valuation allowance for deferred tax assets (23.5) (7.2)
Total deferred tax assets 487.0 394.6
Deferred tax liabilities:
Depreciation and amortization (127.8) (150.4)
Other differences between tax and fi nancial statement values (0.5) (4.3)
Total deferred tax liabilities (128.3) (154.7)
Total net deferred tax assets $ 358.7 $ 239.9