Seagate 2009 Annual Report Download - page 99

Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
for purposes of the reconciliation between the provision for income taxes at the statutory rate and the effective tax rate. For fiscal years 2009 and
2008, a notional 35% statutory rate is used.
A substantial portion of the Company's operations in China, Malaysia, Singapore, Switzerland and Thailand operate under various tax
holidays and tax incentive programs, which expire in whole or in part at various dates through 2020. Certain of the tax holidays may be extended
if specific conditions are met. The net impact of these tax holidays and tax incentive programs was to increase the Company's net income by
approximately $307 million in fiscal year 2010 ($0.60 per share, diluted), to decrease the Company's net loss by approximately $79 million in
fiscal year 2009 ( $ 0.16 per share, diluted), and to increase the Company's net income by $214 million in fiscal year 2008 ($0.40 per share,
diluted).
Since establishing Irish tax residency in fiscal year 2010 as a result of the implementation of certain pre-reorganization steps in connection
with the Company's previously announced plan to move its corporate headquarters to Ireland, the Company consists of an Irish tax resident
parent holding company with various U.S. and non-U.S. subsidiaries that operate in multiple non-Irish taxing jurisdictions. The amount of
temporary differences (including undistributed earnings) related to outside basis differences in the stock of non-Irish resident subsidiaries
considered indefinitely reinvested outside of Ireland for which Irish income taxes have not been provided was approximately $2.7 billion. The
determination of the amount of Irish tax that would accrue if such amount was remitted into Ireland is not practicable.
Effective at the beginning of fiscal year 2008, the Company adopted the authoritative guidance on accounting for uncertainty in income
taxes. This guidance contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax
position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be
sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest
amount that is more than 50% likely of being realized upon ultimate settlement.
As a result of the implementation of the guidance, the Company increased its liability for net unrecognized tax benefits at the date of
adoption. The Company accounted for the increase primarily as a cumulative effect of a change in accounting principle that resulted in a
decrease to retained earnings of
93
Fiscal Years Ended
(Dollars in millions)
July 2,
2010
July 3,
2009
(1)
June 27,
2008
(1)
Provision (benefit) at statutory rate
$
392
$
(985
)
$
461
Net U.S. state income tax provision
3
6
12
Permanent differences
2
9
10
Non
-deductible goodwill
impairments
—
813
—
Valuation allowance
(77
)
310
(37
)
Non
-U.S. losses with no tax
benefits
31
263
46
Non
-
U.S. earnings taxed at less than
statutory rate
(393
)
(138
)
(452
)
Tax expense related to
intercompany transactions
26
27
24
Other individually immaterial items
(24
)
6
3
Provision for (benefit from) income
taxes
$
(40
)
$
311
$
67
(1) As adjusted due to a required change in the accounting for convertible debt instruments implemented in the
first quarter of fiscal year 2010, applied on a retrospective basis.