NVIDIA 2009 Annual Report Download - page 121

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NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
As of January 25, 2009, United States federal and state income taxes have not been provided on approximately $823.6
million of undistributed earnings of non-United States subsidiaries as such earnings are considered to be permanently reinvested.
The Company has a tax holiday in effect for its business operations in India which will terminate in March 2010. This tax
holiday provides for a lower rate of taxation on certain classes of income based on various thresholds of investment and employment
in such jurisdiction. For fiscal year 2009, the tax savings of this holiday was approximately $0.9 million with no material per-share
impact.
On January 29, 2007, we adopted FASB Interpretation No. 48, or FIN 48, Accounting for Uncertainty in Income Taxes. The
cumulative effect of adoption of FIN 48 did not result in a material adjustment to our tax liability for unrecognized income tax
benefits. As of January 25, 2009, we had $95.3 million of unrecognized tax benefits, all of which would affect our effective tax rate if
recognized. However, included in the unrecognized tax benefits that would affect our effective tax rate if recognized of $95.3 million
is $19.7 million related to state income tax that, if recognized, would be in the form of a carryforward deferred tax asset that would
likely attract a full valuation allowance. The $95.3 million of unrecognized tax benefits as of January 25, 2009 consists of $37.4
million recorded in non-current income taxes payable and $57.9 million reflected as a reduction to the related deferred tax assets.
A reconciliation of unrecognized tax benefits is as follows:
January 25,
2009
January 27,
2008
(In thousands)
Balance at beginning of period $ 77,791 $ 57,544
Increases in tax positions for prior years 6,297 3,900
Decreases in tax positions for prior years (272) (433)
Increases in tax positions for current year 13,622 21,716
Settlements (181) (2,445)
Lapse in statute of limitations (1,938) (2,491)
Balance at end of period $ 95,319 $ 77,791
We have historically classified certain unrecognized tax benefits as income taxes payable, which was included within the current
liabilities section of our Consolidated Balance Sheet. As a result of our adoption of FIN 48, we now classify an unrecognized tax
benefit as a current liability, or as a reduction of the amount of a net operating loss carryforward or amount refundable, to the extent
that we anticipate payment or receipt of cash for income taxes within one year. Likewise, the amount is classified as a long-term
liability if we anticipate payment or receipt of cash for income taxes during a period beyond a year.
Our policy to include interest and penalties related to unrecognized tax benefits as a component of income tax expense did not
change as a result of implementing FIN 48. As of January 25, 2009 and January 27, 2008, we had accrued $11.8 million and $11.2
million, respectively, for the payment of interest and penalties related to unrecognized tax benefits, which is not included as a
component of our unrecognized tax benefits. As of January 25, 2009, non-current income taxes payable of $49.2 million consists of
unrecognized tax benefits of $37.4 million and the related interest and penalties of $11.8 million.
While we believe that we have adequately provided for all tax positions, amounts asserted by tax authorities could be greater or
less than our accrued position. Accordingly, our provisions on federal, state and foreign tax-related matters to be recorded in the future
may change as revised estimates are made or the underlying matters are settled or otherwise resolved. As of January 25, 2009, we do
not believe that our estimates, as otherwise provided for, on such tax positions will significantly increase or decrease within the next
twelve months.
We are subject to taxation by a number of taxing authorities both in the United States and throughout the world. As of January
25, 2009, the material tax jurisdictions that are subject to examination include the United States, Hong Kong, Taiwan, China, India,
and Germany and include our fiscal years 2003 through 2009. As of January 25, 2009, the material tax jurisdictions for which we are
currently under examination include India for fiscal years 2003 through 2007 and Germany for fiscal years 2004 through 2006.
102
Source: NVIDIA CORP, 10-K, March 13, 2009 Powered by Morningstar® Document Research℠