Yahoo 2012 Annual Report Download - page 121

In connection with a review of the Company’s cash position and anticipated cash needs for investment in the
Company’s core business, including potential acquisitions and capital expenditures, and stock repurchases, the
Company made a one-time repatriation of foreign earnings and return of basis of foreign subsidiaries of
$962 million from certain of its consolidated foreign subsidiaries in 2012. The distribution resulted in a net tax
benefit of approximately $117 million during the twelve months ended December 31, 2012 since the foreign tax
credits associated with the distribution are greater than the tax due on the distribution of the foreign earnings. The
remaining undistributed foreign earnings of approximately $2 billion, principally related to Yahoo Japan, will
continue to be indefinitely reinvested going forward. If these earnings were to be repatriated in the future, the
Company may be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits). It is
not practicable to determine the income tax liability that might be incurred if these earnings were to be
repatriated.
The total amount of gross unrecognized tax benefits was $727 million as of December 31, 2012, of which up to
$523 million would affect the Company’s effective tax rate if realized. A reconciliation of the beginning and
ending amount of unrecognized tax benefits in 2011 and 2012 is as follows (in thousands):
2011 2012
Unrecognized tax benefits balance at January 1 ................................. $597,055 $532,862
Gross increase for tax positions of prior years .................................. 21,001 9,441
Gross decrease for tax positions of prior years .................................. (111,597) (32,513)
Gross increase for tax positions of current year ................................. 37,966 231,525
Settlements .............................................................. (9,617) (10,520)
Lapse of statute of limitations ............................................... (1,946) (3,428)
Unrecognized tax benefits balance at December 31 .............................. $532,862 $727,367
The total unrecognized tax benefits as of December 31, 2011 and 2012 include approximately $139 million and
$84 million, respectively, of unrecognized tax benefits that have been netted against the related deferred tax
assets. The remaining balances are recorded on the Company’s consolidated balance sheets as follows (in
thousands):
December 31,
2011 2012
Total unrecognized tax benefits balance ....................................... $532,862 $727,367
Amounts netted against related deferred tax assets ............................... (139,258) (83,635)
Unrecognized tax benefits recorded on consolidated balance sheets ................. $393,604 $643,732
Amounts classified as accrued expenses and other current liabilities ................. $ — $ 30,484
Amounts classified as deferred and other long-term tax liabilities, net ............... 393,604 613,248
Unrecognized tax benefits recorded on consolidated balance sheets ................. $393,604 $643,732
The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. To
the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and
reflected as a reduction of the overall income tax provision in the period that such determination is made. During
2011 and 2012, interest and penalties recorded in the consolidated statements of income were a credit of $2
million and a charge of $37 million, respectively. The amounts of accrued interest and penalties recorded on the
consolidated balance sheets as of December 31, 2011 and 2012 were approximately $14 million and $51 million,
respectively.
The Company files income tax returns in the U.S. federal jurisdiction and in many U.S. state and foreign
jurisdictions. The tax years 1995 to 2010 remain open to examination by the major taxing jurisdictions in which
the Company is subject to tax.
107