THQ 2011 Annual Report Download - page 76

settlement with the relevant tax authority.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (amounts in thousands):
Balance at March 31, 2008
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Balance at March 31, 2009
Additions based on tax positions related to the current year
Settlements
Reductions for tax positions of prior years
Balance at March 31, 2010
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Balance at March 31, 2011
$ 11,636
807
42
(1,506)
$ 10,979
1,719
(6,180)
(499)
$ 6,019
624
161
(2)
(3,416)
$ 3,386
The total unrecognized tax benefit of $3.4 million at March 31, 2011 is reflected in our consolidated balance sheet as $3.4 million
in net long-term deferred tax assets. The amount of unrecognized tax benefits at March 31, 2011 includes $2.7 million of
unrecognized tax benefits which, if ultimately recognized, may reduce our effective tax rate, subject to future realizability of the
assets.
We are subject to income taxes in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Tax regulations within
each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply.
With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities
for fiscal years before 2007.
On October 20, 2010, we received notification from the California Franchise Tax Board that it had completed its review of our
amended tax returns for fiscal years ended March 31, 2004 to March 31, 2007 and has accepted them as filed. On February 11,
2011, we received a letter from HM Revenue & Customs notifying us that the return filed by our U.K. subsidiary, THQ Digital
Studios UK LTD, for the fiscal year ended March 31, 2009, was accepted as filed. We have evaluated the impact of the conclusions
reached in these examinations and accordingly, in fiscal 2011, we reduced our uncertain tax positions.
Our uncertain tax positions at March 31, 2011 relate to tax years that remain subject to examination by the relevant tax authorities.
We are currently under audit by various U.S. state and foreign jurisdictions for fiscal years subsequent to 2007. We expect some
of these examinations to be concluded and settled in the next 12 months, however, we do not anticipate a material impact to the
liability for unrecognized tax benefits or the timing of such changes. We do not anticipate any significant changes in the unrecognized
tax benefits in fiscal 2012 related to the expiration of the statutes of limitations.
Our policy is to recognize interest and penalty expense, if any, related to uncertain tax positions as a component of income tax
expense. For fiscal 2011 and 2010, we recognized zero in interest expense, related to uncertain tax positions. As of March 31,
2011 and 2010, we had an accrued liability of zero, for interest related to uncertain tax positions. These amounts, if any, are included
in other long-term liabilities in the consolidated balance sheets.
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