Dell 2010 Annual Report Download - page 102

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Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Total
(in millions)
Balance at February 1, 2008 $ 1,483
Increases related to tax positions of the current year 298
Increases related to tax positions of prior years 19
Reductions for tax positions of prior years (217)
Lapse of statute of limitations (7)
Audit settlements (38)
Balance at January 30, 2009 1,538
Increases related to tax positions of the current year 298
Increases related to tax positions of prior years 32
Reductions for tax positions of prior years (69)
Lapse of statute of limitations (3)
Audit settlements (3)
Balance at January 29, 2010 1,793
Increases related to tax positions of the current year 262
Increases related to tax positions of prior years 22
Reductions for tax positions of prior years (41)
Lapse of statute of limitations (32)
Audit settlements (21)
Balance at January 28, 2011 $ 1,983
Fiscal 2009 reductions for tax positions of prior years in the table above include $163 million of items that did not impact Dell's effective
tax rate for Fiscal 2009. These items include foreign currency translation, withdrawal of positions expected to be taken for prior year tax
filings, and a reduction that is included in the deferred tax asset valuation allowance at January 30, 2009. There were no significant items
of a similar nature in Fiscal 2010 or Fiscal 2011.
The unrecognized tax benefits in the table above do not include accrued interest and penalties of $552 million, $507 million, and
$400 million as of January 28, 2011, January 29, 2010, and January 30, 2009, respectively. The interest and penalties are offset by tax
benefits from transfer pricing, interest deductions, and state income tax, which are also not included in the table above. These benefits
were $242 million, $209 million and $166 million as of January 28, 2011, January 29, 2010, and January 30, 2009, respectively. The net
amount of $2.3 billion as of January 28, 2011 if recognized, would favorably affect Dell's effective tax rate.
Interest and penalties related to income tax liabilities are included in income tax expense. Dell recorded $45 million, $107 million, and
$112 million related to interest and penalties, which were included in income tax expense for Fiscal 2011, Fiscal 2010, and Fiscal 2009,
respectively.
Dell is currently under income tax audits in various jurisdictions, including the United States. The tax periods open to examination by the
major taxing jurisdictions to which Dell is subject include fiscal years 1997 through 2011. As a result of these audits, Dell maintains
ongoing discussions and negotiations relating to tax matters with the taxing authorities in these various jurisdictions. Dell's U.S. federal
income tax returns for fiscal years 2007 through 2009 are currently under examination by the Internal Revenue Service ("IRS"). The IRS
issued a Revenue Agent's Report ("RAR") for fiscal years 2004 through 2006 proposing certain assessments primarily related to transfer
pricing matters. Dell disagrees with certain of the proposed assessments and has contested them through the IRS
98