Foot Locker 2010 Annual Report Download - page 69

Items that gave rise to significant portions of the deferred tax accounts are as follows:
2010 2009
(in millions)
Deferred tax assets:
Tax loss/credit carryforwards and capital loss..................... $ 31 $106
Employee benefits ...................................... 67 66
Reserve for discontinued operations........................... 4 4
Repositioning and restructuring reserves ....................... 1 1
Property and equipment................................... 173 177
Straight-line rent ....................................... 27 27
Goodwill and other intangible assets .......................... 23 23
Other ............................................... 27 33
Total deferred tax assets .................................... 353 437
Valuation allowance ..................................... (6) (12)
Total deferred tax assets, net .............................. 347 425
Deferred tax liabilities:
Inventories ........................................... 63 46
Other ............................................... 6 5
Total deferred tax liabilities .................................. 69 51
Net deferred tax asset...................................... $278 $374
Balance Sheet caption reported in:
Deferred taxes ......................................... $296 $362
Other current assets ..................................... 2 17
Other current liabilities ................................... (20) (5)
$278 $374
The Company operates in multiple taxing jurisdictions and is subject to audit. Audits can involve complex
issues that may require an extended period of time to resolve. A taxing authority may challenge positions that
the Company has adopted in its income tax filings. Accordingly, the Company may apply different tax treatments
for transactions in filing its income tax returns than for income tax financial reporting. The Company regularly
assesses its tax positions for such transactions and records reserves for those differences.
The Company’s U.S. Federal income tax filings have been examined by the Internal Revenue Service (the
‘‘IRS’’) through 2009. The Company is participating in the IRS’s Compliance Assurance Process (‘‘CAP’’) for 2010,
which is expected to conclude during 2011. The Company has started the CAP for 2011. Due to the recent
utilization of net operating loss carryforwards, the Company is subject to state and local tax examinations
effectively including years from 1996 to the present. To date, no adjustments have been proposed in any audits
that will have a material effect on the Company’s financial position or results of operations.
As of January 29, 2011, the Company has a valuation allowance of $6 million to reduce its deferred tax assets
to an amount that is more likely than not to be realized. The valuation allowance primarily relates to the deferred
tax assets arising from a capital loss associated with the 2008 impairment of the Northern Group note receivable,
state tax loss carryforwards, and state tax credits. A full valuation allowance is required for the capital loss
because the Company does not anticipate realizing sufficient capital gains to utilize this loss. The valuation
allowance for state tax loss and credit carryforwards decreased principally due to anticipated expirations of those
attributes.
Based upon the level of historical taxable income and projections for future taxable income, which are based
upon the Company’s three-year strategic plans, over the periods in which the temporary differences are
anticipated to reverse, management believes it is more likely than not that the Company will realize the benefits
of these deductible differences, net of the valuation allowances at January 29, 2011. However, the amount of the
deferred tax asset considered realizable could be adjusted in the future if estimates of taxable income are
revised.
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