Sony 2015 Annual Report Download - page 211

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES
A reconciliation of the beginning and ending gross amounts of unrecognized tax benefits is as follows:
Yen in millions
March 31
2014 2015 2016
Balance at beginning of the fiscal year 191,886 214,795 157,345
Reductions for tax positions of prior years (19,696) (2,898) (34,893)
Additions for tax positions of prior years 9,325 9,532 6,253
Additions based on tax positions related to the current year 21,877 3,740 3,393
Settlements (6,687) (75,272) (12,556)
Lapse in statute of limitations (4,643) (4,320) (8,229)
Foreign currency translation adjustments 22,733 11,768 (6,411)
Balance at end of the fiscal year 214,795 157,345 104,902
Total net amount of unrecognized tax benefits that, if recognized,
would affect the effective tax rate 93,098 93,538 49,323
The major changes, including settlements, in the total gross amount of unrecognized tax benefit balances
relate to transfer pricing adjustments, including as a result of the Bilateral Advance Pricing Agreements
(“APAs”) and competent authority requests filed for certain subsidiaries in the MC, G&NS IP&S, HE&S, and
Devices segments and All Other, with respect to the intercompany cross-border transactions. The APAs include
agreements between Sony and two taxing authorities under the authority of the mutual agreement procedure
specified in income tax treaties. Sony reviews its estimated tax expense based on the progress made in these
procedures, and the progress of transfer pricing audits generally, and makes adjustments to its estimates as
necessary. In addition, the APAs are government to government negotiations, and therefore it is possible that the
final outcomes of the agreements may differ from Sony’s current assessment of the more-likely-than-not
outcomes of such agreements.
During the fiscal year ended March 31, 2014, Sony reversed 2,699 million yen of interest expense and
recorded 352 million yen of penalties. At March 31, 2014, Sony had recorded liabilities of 6,553 million yen and
4,060 million yen for the payments of interest and penalties, respectively.
During the fiscal year ended March 31, 2015, Sony recorded 290 million yen of interest expense and
reversed 376 million yen of penalties. At March 31, 2015, Sony had recorded liabilities of 6,843 million yen and
3,684 million yen for the payments of interest and penalties, respectively.
During the fiscal year ended March 31, 2016, Sony reversed 1,055 million yen of interest expense and
recorded 674 million yen of penalties. At March 31, 2016, Sony had recorded liabilities of 5,789 million yen and
4,358 million yen for the payments of interest and penalties, respectively.
Sony operates in multiple jurisdictions throughout the world, and its tax returns are periodically audited by
Japanese and foreign taxing authorities. As a result of audit settlements, the conclusion of current examinations,
the expiration of the statute of limitations in several jurisdictions and other reevaluations of Sony’s tax positions,
it is expected that the amount of unrecognized tax benefits will change in the next twelve months. Accordingly,
Sony believes it is reasonably possible that its existing unrecognized tax benefits may be reduced by an amount
up to 3,136 million yen within the next twelve months.
Sony remains subject to examinations by Japanese taxing authorities for tax years from 2008 through 2015,
and by the U.S. and other material foreign taxing authorities for tax years from 1998 through 2015.
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