Mattel 2009 Annual Report Download - page 77

benefits, and decreases in the valuation allowance for utilization and expiration of tax loss and tax credit
carryforwards. Management believes it is more-likely-than-not that Mattel will generate sufficient taxable
income in the appropriate future periods to realize the benefit of the remaining net deferred income tax assets of
$567.1 million. Changes in enacted tax laws could negatively impact Mattel’s ability to fully realize all of the
benefits of its remaining net deferred tax assets.
Differences between the provision for income taxes at the US federal statutory income tax rate and the
provision in the consolidated statements of operations are as follows:
For the Year
2009 2008 2007
(In thousands)
Provision at US federal statutory rates ............................... $231,016 $170,787 $ 246,189
(Decrease) increase resulting from:
Foreign earnings taxed at different rates, including withholding taxes . . (82,029) (70,399) (122,916)
Foreign losses without income tax benefit ........................ 6,148 10,985 15,581
State and local taxes, net of US federal benefit .................... 5,486 (1,065) 3,263
Adjustments to previously accrued taxes ......................... (28,840) — (42,008)
Other ..................................................... (438) (1,980) 3,296
Provision for income taxes ........................................ $131,343 $108,328 $ 103,405
In assessing whether uncertain tax positions should be recognized in its financial statements, Mattel first
determines whether it is more-likely-than-not (a greater than 50 percent likelihood) that a tax position will be
sustained upon examination, including resolution of any related appeals or litigation processes, based on the
technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition
threshold, Mattel presumes that the position will be examined by the appropriate taxing authority that would have
full knowledge of all relevant information. For tax positions that meet the more-likely-than-not recognition
threshold, Mattel measures the amount of benefit recognized in the financial statements at the largest amount of
benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Mattel recognizes
unrecognized tax benefits in the first financial reporting period in which information becomes available
indicating that such benefits will more-likely-than-not be realized.
Mattel records unrecognized tax benefits for US federal, state, local, and foreign tax positions related
primarily to transfer pricing, tax credits claimed, tax nexus, and apportionment. For each reporting period,
management applies a consistent methodology to measure unrecognized tax benefits and all unrecognized tax
benefits are reviewed periodically and adjusted as circumstances warrant. Mattel’s measurement of its
unrecognized tax benefits is based on management’s assessment of all relevant information, including prior audit
experience, the status of current audits, conclusions of tax audits, lapsing of applicable statutes of limitations, and
any administrative guidance or developments.
A reconciliation of unrecognized tax benefits is as follows:
2009 2008 2007
(In millions)
Unrecognized tax benefits at January 1 ...................................... $ 80.3 $76.0 $122.0
Increases for positions taken in current year .................................. 9.4 14.4 17.4
Increases for positions taken in a prior year ................................... 194.3 1.8 9.6
Decreases for positions taken in a prior year .................................. (30.2) (6.4) (44.1)
Decreases for settlements with taxing authorities .............................. (23.0) (4.5) (27.1)
Decreases for lapses in the applicable statute of limitations ...................... (0.8) (1.0) (1.8)
Unrecognized tax benefits at December 31 ................................... $230.0 $80.3 $ 76.0
67