iRobot 2009 Annual Report Download - page 107

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Form 10-K
were excluded from the computation of diluted earnings per share for these periods because their effect would have
been antidilutive.
Income Taxes
Effective December 31, 2006, the Company adopted the relevant authoritative guidance which prescribes a
recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. The impact of adoption on the Company’s opening balance of
retained earnings was zero. As of the beginning of fiscal year 2009, the Company had no material unrecognized tax
benefits and no material unrecognized tax benefits were recorded in the fiscal year ended January 2, 2010. 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 January 2, 2010, December 27, 2008 or December 29, 2007.
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,
2006, although carryforward attributes that were generated prior to fiscal year 2006 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 ability to realize 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 ability to realize
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 January 2, 2010, the Company has total deferred tax assets of
$18.6 million and a valuation allowance of $3.8 million resulting in a net deferred tax asset of $14.8 million.
Comprehensive Income
Comprehensive income includes unrealized losses on certain investments. The differences between net income
and comprehensive income were as follows:
January 2,
2010
December 27,
2008
Fiscal Year Ended
Net income, as reported ...................................... $3,330 $756
Unrealized losses on investments ............................... (41) —
Total comprehensive income ................................. $3,289 $756
Fair Value Measurements
The Company has adopted the authoritative guidance for fair value measurement as of December 30, 2007, for
financial instruments. Although the adoption of this guidance did not materially impact its financial condition,
73
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)