Foot Locker 2013 Annual Report Download - page 78

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Foot Locker, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. Income Taxes − (continued)
Deferred income taxes are provided for the effects of temporary differences between the amounts of assets
and liabilities recognized for financial reporting purposes and the amounts recognized for income tax purposes.
Items that give rise to significant portions of the Company’s deferred tax assets and deferred tax liabilities are
as follows:
2013 2012
(in millions)
Deferred tax assets:
Tax loss/credit carryforwards and capital loss $12 $13
Employee benefits 55 63
Property and equipment 147 160
Straight-line rent 30 28
Goodwill and other intangible assets 620
Other 33 36
Total deferred tax assets 283 320
Valuation allowance (6) (4)
Total deferred tax assets, net 277 316
Deferred tax liabilities:
Merchandise inventories 85 76
Other 11 15
Total deferred tax liabilities 96 91
Net deferred tax asset $181 $225
Balance Sheet caption reported in:
Deferred taxes $241 $257
Other current assets 44
Accrued and other current liabilities (46) (31)
Other liabilities (18) (5)
$181 $225
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 treat-
ments 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 through
2012. The Company is participating in the IRS’s Compliance Assurance Process (‘‘CAP’’) for 2013, which is
expected to conclude during 2014. The Company has started the CAP for 2014. Due to the recent utilization of
net operating loss carryforwards, the Company is subject to state and local tax examinations effectively includ-
ing 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 February 1, 2014, 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. A valuation allowance of $3 million relates to the
deferred tax assets arising from a capital loss associated with the 2008 impairment of the Northern Group note
receivable. The Company does not anticipate realizing capital gains to utilize this loss. In connection with the
acquisition of Runners Point Group, the Company provided a full valuation allowance of $2 million against the
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