iRobot 2008 Annual Report Download - page 120

earnings was zero. As of the beginning of fiscal year 2008, the Company had no material unrecognized tax benefits
and no material unrecognized tax benefits were recorded in the fiscal year ended December 27, 2008. The Company
recognizes interest and penalties related to unrecognized tax benefits in its tax provision and there were no accrued
interest or penalties as of December 27, 2008, December 29, 2007 or December 30, 2006.
The Company is subject to taxation in the United States and various states and foreign jurisdictions. The statute
of limitations for assessment by the IRS and state tax authorities is closed for fiscal years prior to December 31,
2005, although carryforward attributes that were generated prior to fiscal year 2005 may still be adjusted upon
examination by the IRS or state tax authorities if they either have been or will be used in a future period. There are
currently no federal or state audits in progress.
Deferred taxes are determined based on the difference between the financial statement and tax basis of assets
and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Valuation
allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of
the deferred tax assets will not be realized.
The Company monitors the realization of its deferred tax assets based on changes in circumstances, for
example recurring periods of income for tax purposes following historical periods of cumulative losses or changes
in tax laws or regulations. The Company’s income tax provisions and its assessment of the realizability of its
deferred tax assets involve significant judgments and estimates.
In fiscal 2007, the Company completed an analysis of historical and projected future profitability which
resulted in the full release of the valuation allowance relating to federal deferred tax assets. The Company continues
to maintain a valuation allowance against state deferred tax assets due to less certainty of their realizability given the
shorter expiration period associated with these state deferred tax assets and the generation of state tax credits in
excess of the state tax liability. At December 27, 2008, the Company has total deferred tax assets of $15.3 million
and a valuation allowance of $3.5 million resulting in a net deferred tax asset of $11.8 million.
Comprehensive Income (Loss)
SFAS No. 130, Reporting Comprehensive Income, establishes standards for the reporting and display of
comprehensive income (loss) and its components in financial statements. The Company’s comprehensive income
(loss) is equal to the Company’s net income (loss) for all periods presented.
Fair Value Measurements
In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, Fair Value
Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in
accordance with accounting principles generally accepted in the United States, and expands disclosures about fair
value measurements. The Company has adopted the provisions of SFAS 157 as of December 30, 2007, for financial
instruments. Although the adoption of SFAS 157 did not materially impact its financial condition, results of
operations, or cash flow, the Company is now required to provide additional disclosures as part of its financial
statements.
SFAS 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined
as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3,
defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its
own assumptions.
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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)