Supercuts 2010 Annual Report Download - page 129

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. INCOME TAXES (Continued)
The components of the net deferred tax assets and liabilities are as follows:
At June 30, 2010, the Company had U.S. and foreign operating loss carryforwards of approximately $7.2 million relating to losses in
Canada, the Netherlands, and the U.K. The Company has set up a valuation allowance of $1.0 million relating to the Netherlands tax losses.
The Company expects to fully utilize all of the loss carryforwards from Canada and the United Kingdom.
As of June 30, 2010, undistributed earnings of international subsidiaries of approximately $23.8 million were considered to have been
reinvested indefinitely and, accordingly, the Company has not provided for U.S. income taxes on such earnings.
The Company files tax returns and pays tax primarily in the United States, Canada, the U.K., and the Netherlands as well as states, cities,
and provinces within these jurisdictions. In the United States, fiscal years 2007 and after remain open for federal tax audit. The Company has
been notified that the United States federal income tax returns for year 2007 through 2009 have been selected for audit. For state tax audits, the
statute of limitations generally spans three to four years, resulting in a number of states remaining open for tax audits dating back to fiscal year
2006. However, the company is under audit in a number of states in which the statute of limitations has been extended to fiscal years 2000 and
forward. Internationally (including Canada), the statute of limitations for tax audits varies by jurisdiction, but generally ranges from three to
five years.
The Company adopted the provisions of accounting for uncertainty in income taxes, effective July 1, 2007. Immediately prior to the
adoption, the Company's tax reserves were $9.0 million. As a result of the adoption, the Company recognized a $20.7 million increase in the
liability for
125
2010 2009
(Dollars in thousands)
Deferred tax assets:
Deferred rent
$
15,677
$
15,591
Payroll and payroll related costs
34,294
32,712
Net operating loss carryforwards
2,106
2,078
Salon asset impairment
4,154
6,953
Inventories
3,136
4,478
Derivatives
311
1,798
Deferred gift card revenue
1.581
1,703
Unrecognized tax benefits
10,178
7,553
Other
12,357
10,851
Total deferred tax assets
$
83,794
$
83,717
Deferred tax liabilities:
Depreciation
$
(17,603
)
$
(17,454
)
Amortization of intangibles
(107,392
)
(100,502
)
Accrued property taxes
(2,029
)
(2,001
)
Deferred debt issuance costs
(7,937
)
Other
—
(
11
)
Total deferred tax liabilities
$
(134,961
)
$
(119,968
)
Net deferred tax liabilities
$
(51,167
)
$
(36,251
)