Electronic Arts 2009 Annual Report Download - page 178

The total liability for gross unrecognized tax benefits included in our Consolidated Balance Sheet as of
March 31, 2008 was $312 million. The liability for gross unrecognized tax benefits decreased by approximately
$34 million during the current year to a total liability as of March 31, 2009 of $278 million. Of these amounts,
$56 million of liabilities would be offset by prior cash deposits to tax authorities for issues pending resolution. A
reconciliation of the beginning and ending balance of unrecognized tax benefits is summarized as follows (in
millions):
Balance as of April 1, 2007 ............................................................... $283
Increases in unrecognized tax benefits related to prior year tax positions ......................... 10
Decreases in unrecognized tax benefits related to prior year tax positions ........................ (9)
Increases in unrecognized tax benefits related to current year tax positions ....................... 23
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations ............. (2)
Changes in unrecognized tax benefits due to foreign currency translation ........................ 7
Balance as of March 31, 2008 ............................................................. $312
Increases in unrecognized tax benefits related to prior year tax positions ......................... 21
Decreases in unrecognized tax benefits related to prior year tax positions ........................ (24)
Increases in unrecognized tax benefits related to current year tax positions ....................... 36
Decreases in unrecognized tax benefits related to settlements with taxing authorities ............... (13)
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations ............. (29)
Changes in unrecognized tax benefits due to foreign currency translation ........................ (25)
Balance as of March 31, 2009 ............................................................. $278
A portion of our unrecognized tax benefits will affect our effective tax rate if they are recognized upon favorable
resolution of the uncertain tax positions. As of March 31, 2009, approximately $166 million of the unrecognized
tax benefits would affect our effective tax rate and approximately $64 million would result in adjustments to
deferred tax assets with corresponding adjustments to the valuation allowance. As of March 31, 2008,
approximately $257 million of the unrecognized tax benefits would affect our effective tax rate.
Interest and penalties related to estimated obligations for tax positions taken in our tax returns are recognized in
income tax expense in our Consolidated Statements of Operations. The combined amount of accrued interest and
penalties related to tax positions taken on our tax returns and included in non-current other liabilities was
approximately $56 million as of March 31, 2009, as compared to $55 million as of March 31, 2008.
Approximately $4 million of accrued interest expense related to estimated obligations for unrecognized tax
benefits was recognized during fiscal 2009. Accrued penalties decreased by approximately $3 million during
fiscal 2009.
Prior to April 1, 2007, we presented our estimated liability for unrecognized tax benefits as a current liability.
Beginning on April 1, 2007, however, FIN No. 48 requires us to classify liabilities for unrecognized tax benefits
based on whether we expect payment will be made within the next 12 months. Amounts expected to be paid
within the next 12 months are classified as a current liability and all other amounts are classified as a non-current
liability. In addition, prior to April 1, 2007 we presented our estimated state, local and interest liabilities net of
the estimated benefit we expect to receive from deducting such payments on future tax returns (i.e., on a “net”
basis). Beginning on April 1, 2007, FIN No. 48 requires this estimated benefit to be classified as a deferred tax
asset instead of a reduction of the overall liability (i.e., on a “gross” basis).
We file income tax returns in the United States, including various state and local jurisdictions. Our subsidiaries
file tax returns in various foreign jurisdictions, including Canada, France, Germany, Switzerland and the United
Kingdom. The Internal Revenue Service (“IRS”) has completed its examination of our federal income tax returns
through fiscal year 2005. As of March 31, 2009, the IRS had proposed, and we had agreed to, certain adjustments
to our tax returns. The effects of these adjustments have been considered in estimating our future obligations for
unrecognized tax benefits and are not expected to have a material impact on our financial position or results of
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