SanDisk 2008 Annual Report Download - page 101

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Notes to Consolidated Financial Statements
The Company adopted FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement No. 109, on January 1, 2007. As a result of the adoption, the
Company recognized an increase of approximately $1.0 million in the liability for unrecognized tax benefits,
which was accounted for as a reduction to the January 1, 2007 balance of retained earnings. A reconciliation of
the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Balance at January 1, 2007 ............................................................ $ 38,629
Additions based on tax positions related to current year ................................. 30,983
Additions for tax positions of prior years ............................................ 3,051
Reductions for tax positions of prior years ........................................... (2,161)
Reductions due to expiration of statute of limitations ................................... (308)
Balance at December 31, 2007 ......................................................... 70,194
Additions based on tax positions related to current year ................................. 26,342
Additions for tax positions of prior years ............................................ 44,247
Reductions for tax positions of prior years ........................................... (13,501)
Reductions due to expiration of statute of limitations ................................... (2,845)
Balance at December 28, 2008 ......................................................... $124,437
The total amount of unrecognized tax positions that would impact the effective tax rate is approximately
$94.2 million at December 28, 2008. The Company recognizes interest and penalties related to unrecognized tax
benefits in income tax expense. The liability related to unrecognized tax benefits included accrued interest and
penalties of approximately $24.3 million, $9.7 million and $5.0 million at December 28, 2008, December 30,
2007 and December 31, 2006, respectively. Tax expense for the years ended December 28, 2008 and
December 30, 2007 included interest and penalties of $12.3 million and $3.0 million, respectively. Tax expense
for the year ended December 31, 2006 included a net benefit for interest and penalties of $0.8 million.
It is reasonably possible that the unrecognized tax benefits could decrease by approximately $11.7 million
within the next 12 months as a result of the expiration of statutes of limitation. The Company is currently under
audit by several tax authorities. Because timing of the resolution and/or closure of these audits is highly uncertain
it is not possible to estimate other changes to the amount of unrecognized tax benefits for positions existing at
December 28, 2008.
The Company is subject to U.S. federal income tax as well as income taxes in many state and foreign
jurisdictions. The federal statute of limitations on assessment remains open for the tax years 2005 through 2007,
and the statutes of limitation in state jurisdictions remain open in general from tax years 2002 through 2007. The
major foreign jurisdictions remain open for examination in general for tax years 2002 through 2007.
F-36