Salesforce.com 2009 Annual Report Download - page 88

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Table of Contents
salesforce.com, inc.
Notes to Consolidated Financial Statements—(Continued)
The Company had gross unrecognized tax benefits of $22.1 million and $16.5 million as of January 31, 2010 and January 31, 2009 respectively.
A reconciliation of the beginning and ending balance of total unrecognized tax benefits for fiscal years 2010, 2009, and 2008 is as follows (in
thousands):
Fiscal Year Ended January 31,
2010 2009 2008
Balance as of February 1, $ 16,472 $ 11,771 $ 6,542
Tax positions taken in prior period:
Gross increases 457 17 —
Gross decreases (707) (148) (125)
Tax positions taken in current period:
Gross increases 5,401 5,955 5,129
Settlements (212) (149) —
Currency translation effect 642 (974) 225
Balance as of January 31, $ 22,053 $ 16,472 $ 11,771
For fiscal year 2010, 2009, and 2008 total unrecognized tax benefits in an amount of $16.5 million, $11.8 million and $7.9 million respectively, if
recognized, would reduce income tax expense and the Company's effective tax rate.
The Company recognizes interest accrued and penalties related to unrecognized tax benefits in the income tax provision. As of January 31, 2010, the
Company accrued no penalties and an immaterial amount of interest in income tax expense. Interest expense accrued for fiscal 2010, 2009 and 2008 was also
immaterial.
Tax positions for the Company and its subsidiaries are subject to income tax audits by many tax jurisdictions throughout the world. The Company's
U.S. federal and state tax returns for all tax years since February 1999, which was the inception of the Company, remain open to examination. Outside the
U.S., tax returns filed in major jurisdictions where the Company operates, including Canada, United Kingdom, and Australia generally remain open to
examination for all tax years, while for Japan, the statute of limitations currently remains open for tax years after fiscal year 2003.
Management does not believe that it is reasonably possible that the estimates of unrecognized tax benefits will change significantly in the next twelve
months. However, an adverse resolution of one or more uncertain tax positions in any period could have a material impact on the results of operations for that
period.
8. Commitments
Letters of Credit
As of January 31, 2010, the Company had a total of $10.6 million in letters of credit outstanding substantially in favor of its landlords for office space
in San Francisco, California, New York City, Singapore, Sweden and Switzerland. These letters of credit renew annually and mature at various dates through
October 2018.
Leases
The Company leases office space and equipment under noncancelable operating and capital leases with various expiration dates.
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