Hasbro 2013 Annual Report Download - page 83

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HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)
A reconciliation of unrecognized tax benefits, excluding potential interest and penalties, for the fiscal years
ended December 29, 2013, December 30, 2012 and December 25, 2011 is as follows:
2013 2012 2011
Balance at beginning of year ............................... $103,067 83,814 91,109
Gross increases in prior period tax positions ................ 8,677 3,089 811
Gross decreases in prior period tax positions ................ (33,181) (10,856) (33,501)
Gross increases in current period tax positions .............. 10,353 30,008 27,910
Decreases related to settlements with tax authorities .......... (31,478) — (792)
Decreases from the expiration of statute of limitations ........ (1,979) (2,988) (1,723)
Balance at end of year .................................... $ 55,459 103,067 83,814
If the $55,459 balance as of December 29, 2013 is recognized, approximately $54,000 would decrease the
effective tax rate in the period in which each of the benefits is recognized. The remaining amount would be offset
by the reversal of related deferred tax assets.
During 2013, 2012, and 2011 the Company recognized $4,634, $3,110 and $3,100, respectively, of potential
interest and penalties, which are included as a component of income taxes in the accompanying consolidated
statements of operations. At December 29, 2013, December 30, 2012 and December 25, 2011, the Company had
accrued potential interest and penalties of $24,547, $20,377 and $13,847, respectively.
The Company and its subsidiaries file income tax returns in the United States and various state and
international jurisdictions. In the normal course of business, the Company is regularly audited by U.S. federal,
state and local and international tax authorities in various tax jurisdictions. The Company is no longer subject to
U.S. federal income tax examinations for years before 2010. With few exceptions, the Company is no longer
subject to U.S. state or local and non-U.S. income tax examinations by tax authorities in its major jurisdictions
for years before 2006.
During 2013, the U.S. Internal Revenue Service completed an examination related to the 2008 and 2009
U.S. federal income tax returns. As the result of the completion of this examination, unrecognized tax benefits,
which are included as a component of other liabilities in the consolidated balance sheets, decreased $67,174. Of
this amount, $29,970 was recorded as an increase to current liabilities, $14,112 as a reduction of deferred tax
assets and the remainder as a reduction of income tax expense. The total income tax benefit resulting from the
completion of the examination, including other adjustments, totaled $23,637 during 2013. The Company is
currently under income tax examination in several U.S. state and local and non-U.S. jurisdictions.
During 2011, as a result of the completion of an examination related to the 2006 and 2007 U.S. federal
income tax returns by the U.S. Internal Revenue Service, the Company recognized $22,101 of previously accrued
unrecognized tax benefits, including the reversal of related accrued interest, primarily related to the deductibility
of certain expenses, as well as the tax treatment of certain subsidiary and other transactions. Of this amount,
$1,482 was recorded as a reduction of deferred tax assets and the remainder as a reduction of income tax
expense. The total income tax benefit resulting from the completion of the examination, including other
adjustments, totaled $20,477 during 2011.
In connection with tax examinations in Mexico for the years 2000 to 2007, the Company has received tax
assessments totaling approximately $248,760, which includes interest, penalties and inflation updates, related to
transfer pricing which the Company is vigorously defending. In order to continue the process of defending its
position, the Company was required to guarantee the amount of the assessments for the years 2000 to 2004, as is
usual and customary in Mexico with respect to these matters. Accordingly, as of December 29, 2013, bonds
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