Logitech 2011 Annual Report Download - page 229

ANNUAl REPORT
217
Deferred tax assets relating to tax benefits of employee stock option grants and RSUs have been reduced to
reflect exercises in fiscal years 2011 and 2010. Some exercises resulted in tax deductions in excess of previously
recorded benefits based on the option value at the time of grant (“windfalls”). Although these additional tax benefits
are reflected in net operating loss carryforwards, the additional tax benefit associated with the windfall is not
recorded until the deduction reduces cash taxes payable. During fiscal years 2011 and 2010, the Company recorded
a credit to equity of $4.8 million and $0.3 million.
As of March 31, 2011, the Company had foreign net operating loss and tax credit carryforwards for income tax
purposes of $285.9 million and $25.4 million. Approximately $121.7 million of the net operating loss carryforwards
and $20.2 million of the tax credit carryforwards, if realized, will be credited to equity since they have not met the
applicable realization criteria. A full valuation allowance has been provided for foreign tax credits of $0.1 million.
Unused net operating loss carryforwards will expire at various dates in fiscal years 2014 to 2031, and the tax credit
carryforwards will begin to expire in fiscal year 2012.
As of March 31, 2011, the Company had capital loss carryforwards of approximately $5.7 million for which a
full valuation allowance has been provided. The loss will begin to expire in fiscal year 2016.
Swiss income taxes and non-Swiss withholding taxes associated with the repatriation of earnings or for
other temporary differences related to investments in non-Swiss subsidiaries have not been provided for, as the
Company intends to reinvest the earnings of such subsidiaries indefinitely or the Company has concluded that
no additional tax liability would arise on the distribution of such earnings. If these earnings were distributed to
Switzerland in the form of dividends or otherwise, or if the shares of the relevant non-Swiss subsidiaries were sold
or otherwise transferred, the Company may be subject to additional Swiss income taxes and non-Swiss withholding
taxes. Determination of the amount of unrecognized deferred income tax liability related to these earnings is
not practicable.
The Company follows a two-step approach to recognizing and measuring uncertain tax positions. The first
step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates
that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or
litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than
50% likely of being realized upon ultimate settlement.
As of March 31, 2011 and 2010, the total amount of unrecognized tax benefits was $138.1 million and
$125.2 million, of which $118.2 million and $101.4 million would affect the effective income tax rate if realized.
The Company classified the unrecognized tax benefits as non-current income taxes payable.
The aggregate changes in gross unrecognized tax benefits in fiscal years 2011, 2010 and 2009 were as follow
(in thousands):
Beginning balance as of March 31, 2008 ....................................... $ 92,647
Lapse of statute of limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,978)
Increases in balances related to tax positions taken during the current period ....... 6,958
Balance as of March 31, 2009 ................................................ $97,627
Lapse of statute of limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,667)
Decreases in balances related to tax positions taken during prior periods . . . . . . . . . . (229)
Increases in balances related to tax positions taken during prior periods ........... 2,690
Increases in balances related to tax positions taken during the current period ....... 17,207
Balance as of March 31, 2010 ................................................ $113,628
Lapse of statute of limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,760)
Settlements with tax authorities ........................................... (6,290)
Increases in balances related to tax positions taken during the current period ....... 27,550
Balance as of March 31, 2011 ................................................ $130,128