Seagate 2008 Annual Report Download - page 106

Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
6. Income Taxes (Continued)
an increase to goodwill of $25 million. The total amount of gross unrecognized tax benefits as of the date of adoption was $385 million
excluding interest and penalties.
As of July 3, 2009 and June 27, 2008, the Company had approximately $118 million and $374 million, respectively, in unrecognized tax
benefits excluding interest and penalties. The unrecognized tax benefits that, if recognized, would impact the effective tax rate were $118 million
and $68 million as of July 3, 2009 and June 27, 2008, respectively, subject to certain future valuation allowance reversal. As a result of the
adoption of SFAS No. 141(R) in fiscal year 2010, the amount of unrecognized tax benefits as of July 3, 2009 that would impact the effective tax
rate was approximately $118 million.
The following table summarizes the activity related to the Company's gross unrecognized tax benefits:
It is the Company's policy to include interest and penalties related to unrecognized tax benefits in the provision for taxes on the
Consolidated Statements of Operations. As of June 27, 2008, the Company accrued approximately $22 million for the payment of interest and
penalties relating to unrecognized tax benefits. The accrual decreased by $6 million to approximately $16 million as of July 3, 2009.
During the fiscal year ended July 3, 2009, the Company's unrecognized tax benefits excluding interest and penalties decreased by
approximately $256 million primarily due to (i) reductions associated with audit activity of $6 million, (ii) reductions associated with the
expiration of certain statutes of limitation of $23 million, (iii) reductions associated with the Maxtor liquidation transactions of $232 million,
(iv) increases in current year unrecognized tax benefits of $13 million, and (v) reductions from foreign exchange gains of $8 million.
Approximately $21 million of reduction in unrecognized tax benefits during the period was recorded as a reduction to goodwill.
During the 12 months beginning July 4, 2009, the Company expects to reduce its unrecognized tax benefits by approximately $8 million as
a result of the expiration of certain statutes of limitation. The Company does not believe it is reasonably possible that other unrecognized tax
benefits will materially change in the next 12 months. However, the resolution and/or timing of closure on open audits are highly uncertain as to
when these events occur.
The Company files U.S. federal, U.S. state, and foreign tax returns. The Internal Revenue Service (IRS) is currently examining fiscal years
2005 through 2007. For state and foreign tax returns, the Company is generally no longer subject to tax examinations for years prior to fiscal
year 2001. The statute of limitation for U.S. Federal returns is open for fiscal year 2005 and forward.
104
(Dollars in millions)
Fiscal Year Ended
July 3,
2009
Fiscal Year Ended
June 27,
2008
Balance of unrecognized tax benefits at the beginning of the year
$
374
$
385
Gross increase for tax positions of prior years
49
3
Gross decrease for tax positions of prior years
(287
)
(13
)
Gross increase for tax positions of current year
13
12
Gross decrease for tax positions of current year
—
(
3
)
Settlements
—
(
1
)
Lapse of statutes of limitation
(23
)
(9
)
Foreign exchange (gain)/loss
(8
)
—
Balance of unrecognized tax benefits at the end of the year
$
118
$
374