Seagate 2012 Annual Report Download - page 94

Table of Contents
SEAGATE TECHNOLOGY PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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. During fiscal year 2013, the Company recognized a net tax expense for interest and penalties of
$2 million as compared to a net tax expense for interest and penalties of $2 million and less than $1 million during fiscal year 2012 and fiscal
year 2011, respectively. As of June 28, 2013, the Company had $19 million of accrued interest and penalties related to unrecognized tax benefits
compared to $17 million in fiscal year 2012.
During the 12 months beginning June 29, 2013, the Company expects to reduce its unrecognized tax benefits by approximately $3 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.
The Company is subject to taxation in many jurisdictions globally and is required to file U.S. federal, U.S. state and non-U.S. income tax
returns. In February, 2013, the Company and the IRS reached a settlement on all issues related to fiscal years ending in 2005 through 2007.
Settlement of the issues in this period has no material impact on the Company's financial statements. The Company is no longer subject to tax
examination of US federal income tax returns for years prior to fiscal year 2008. With respect to U.S. state and non-U.S. income tax returns, the
Company is generally no longer subject to tax examinations for years ending prior to fiscal year 2004.
8. Derivative Financial Instruments
The Company is exposed to foreign currency exchange rate, interest rate, and to a lesser extent, equity price risks relating to its ongoing
business operations. The Company enters into foreign currency forward exchange contracts in order to manage the foreign currency exchange
rate risk on forecasted expenses denominated in foreign currencies and to mitigate the remeasurement risk of certain foreign currency
denominated liabilities. The Company's accounting policies for these instruments are based on whether the instruments are classified as
designated or non-designated hedging instruments. The Company records all derivatives in the Consolidated Balance Sheets at fair value. The
effective portions of designated cash flow hedges are recorded in Accumulated other comprehensive loss until the hedged item is recognized in
earnings. Derivatives that are not designated as hedging instruments and the ineffective portions of cash flow hedges are adjusted to fair value
through earnings. The amount of net unrealized gains (losses) on cash flow hedges were not material as of June 28, 2013 and June 29, 2012.
87
Fiscal Years Ended
(Dollars in millions)
June 28,
2013
June 29,
2012
July 1,
2011
Balance of unrecognized tax benefits at the
beginning of the year
$
135
$
128
$
115
Gross increase for tax positions of prior years
14
1
30
Gross decrease for tax positions of prior years
(4
)
(3
)
(24
)
Gross increase for tax positions of current year
16
13
13
Gross decrease for tax positions of current year
—
—
—
Settlements
—
—
—
Lapse of statutes of limitation
(5
)
(3
)
(10
)
Non
-
U.S. exchange (gain)/loss
1
(1
)
4
Balance of unrecognized tax benefits at the end of
the year
$
157
$
135
$
128