Vistaprint 2014 Annual Report Download - page 84

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receive a tax benefit associated with the future amortization of the fair market value of the intellectual property
received, which for tax purposes will occur over a period of five years in accordance with the applicable tax laws.
On January 2, 2012, one of our subsidiaries purchased Webs' global sales and distribution rights, customer
lists, marketing intangibles, web-based technologies, software tools, and related technical data and know-how
(collectively “Webs Intellectual Property”) in order to align the Webs business with our global operations. The
transfer of assets occurred between two wholly owned legal entities within the Vistaprint group that are based in
different tax jurisdictions, creating a taxable gain reportable in the transferor entity's jurisdiction. The gain is
recognized for income tax purposes only and not in our consolidated financial statements. As the gain was the
result of an intra-entity transaction in accordance with U.S. GAAP, any gain or loss and immediate tax impact is
eliminated and not recognized in the consolidated financial statements. We recognize tax expense specifically
associated with an intra-entity transfer of intangible property over a period equal to the expected economic lives of
the underlying assets transferred. In the transfer of Webs' Intellectual Property, the weighted average amortization
period of 13 years was determined based on the estimated economic lives of the intellectual property transferred.
We elected to fund the transfer of Webs Intellectual Property using an installment obligation payable over a
7.5 year period. The decision to structure the transaction with an installment obligation was driven by financing and
cash flow considerations, and the terms of the installment obligation were determined on an appropriate arm's-
length basis. In compliance with local tax laws in the applicable jurisdictions, the tax liability associated with this
transfer qualified for installment treatment and, thus, the cash tax liability will be payable over the term of the
underlying installment obligation. Accordingly, the Company recorded a deferred tax liability for the entire tax liability
owed but not yet paid as of the date of the transaction with a corresponding asset in “Other Assets” to reflect the
deferred tax charge to be recognized over the expected remaining lives of the underlying assets as described
above.
As of June 30, 2014, undistributed earnings of our subsidiaries of $112,542 are considered to be indefinitely
reinvested. If, in the future, we decide to repatriate undistributed earnings from certain of these subsidiaries in the
form of dividends or otherwise, we could be subject to withholding taxes payable at that time. Determination of the
amount of withholding taxes that would be payable is not practicable due to the complexities associated with this
hypothetical calculation.
A reconciliation of the gross beginning and ending amount of unrecognized tax benefits is as follows:
Balance at June 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,320
Additions based on tax positions related to the current tax year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250
Reductions based on tax positions related to prior tax years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (234)
Reductions due to audit settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (654)
Balance at June 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,682
Additions based on tax positions related to the current tax year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
Additions based on tax positions related to prior tax years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,244
Reductions due to lapse of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (334)
Balance at June 30, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,744
For the years ended June 30, 2014 and 2013, the amount of unrecognized tax benefits (exclusive of
interest) that, if recognized, would impact the effective tax rate is $3,061 and $2,157, respectively. We recognize
interest and, if applicable, penalties related to unrecognized tax benefits in income tax expense. The accrued
interest and penalties recognized as of June 30, 2014 and 2013 were $298 and $241, respectively.
It is reasonably possible that a further change in unrecognized tax benefits may occur within the next twelve
months related to the settlement of one or more audits or the lapse of applicable statutes of limitations. However, an
estimated range of the impact on the unrecognized tax benefits cannot be quantified at this time. We believe we
have appropriately provided for all tax uncertainties.
We conduct business in a number of tax jurisdictions and, as such, are required to file income tax returns in
multiple jurisdictions globally. The years 2007 through 2013 remain open for examination by the United States
Internal Revenue Service (“IRS”) and the years 2006 through 2013 remain open for examination in the various
states and non-US tax jurisdictions in which we file tax returns.