Mattel 2015 Annual Report Download - page 67

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not (a greater than 50 percent likelihood) 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 $450.1 million. Changes in enacted tax laws, audits in
various jurisdictions around the world, settlements, or acquisitions 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
2015 2014 2013
(In thousands)
Provision at US federal statutory rate $ 162,370 $ 205,419 $ 384,695
(Decrease) increase resulting from:
Foreign earnings taxed at different rates, including withholding
taxes (56,877)(107,409)(165,768)
Foreign losses without income tax benefit 5,843 20,140 3,215
State and local taxes, net of US federal benefit 482 3,760 4,854
Adjustments to previously accrued taxes (19,134)(55,026)(32,200)
Tax restructuring — 12,400 —
Other 1,815 8,752 388
Provision for income taxes $ 94,499 $ 88,036 $ 195,184
In assessing whether uncertain tax positions should be recognized in its financial statements, Mattel first determines
whether it is more-likely-than-not 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 audits, conclusions of tax audits, lapsing of applicable
statutes of limitations, identification of new issues, and any administrative guidance or developments.
A reconciliation of unrecognized tax benefits is as follows:
For the Year
2015 2014 2013
(In thousands)
Unrecognized tax benefits at January 1 $ 100,357 $ 111,370 $ 285,560
Increases for positions taken in current year 5,724 9,886 12,997
Increases for positions taken in a prior year 22,584 53,221 14,289
Decreases for positions taken in a prior year (4,242)(51,421)(186,555)
Decreases for settlements with taxing authorities (3,577)(9,493)(5,135)
Decreases for lapses in the applicable statute of limitations (2,747)(13,206)(9,786)
Unrecognized tax benefits at December 31 $ 118,099 $ 100,357 $ 111,370
Of the $118.1 million of unrecognized tax benefits as of December 31, 2015, $114.3 million would impact the effective
tax rate if recognized.