Yahoo 2014 Annual Report Download - page 149

exercise of employee stock options are not recorded on the Company’s consolidated balance sheets
and are accounted for as a credit to additional paid-in capital if and when realized through a
reduction in income taxes payable.
The Company has a valuation allowance of approximately $24 million as of December 31, 2014
against certain deferred income tax assets that are not more likely than not to be realized in future
periods. In evaluating the Company’s ability to realize its deferred income tax assets, the Company
considers all available positive and negative evidence, including operating results, ongoing tax
planning, and forecasts of future taxable income on a jurisdiction by jurisdiction basis. The valuation
allowance as of December 31, 2014 relates to foreign net operating loss carryforwards that will reduce
the provision for income taxes if and when recognized.
In 2012, the Company made a one-time distribution of foreign earnings resulting in an overall net
benefit of $117 million. During 2013, the Company recorded an additional net benefit of $36 million
related to this distribution. In 2014, the Company recorded a detriment of $8 million to account for
the corresponding adjustments from the IRS on foreign earnings available at the time of the 2012
repatriation. As of December 31, 2014, the Company does not anticipate a repatriation of its
undistributed foreign earnings of approximately $2.9 billion. Those earnings are principally related to
Yahoo Japan. 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 $1,024 million as of December 31, 2014, of
which up to $706 million would affect the Company’s effective tax rate if realized. A reconciliation of
the beginning and ending amount of unrecognized tax benefits in 2013 and 2014 is as follows (in
thousands):
2012 2013 2014
Unrecognized tax benefits balance at January 1 $532,862 $727,367 $ 695,285
Gross increase for tax positions of prior years 9,441 69,188 65,606
Gross decrease for tax positions of prior years (32,513) (40,298) (9,954)
Gross increase for tax positions of current year 231,525 34,556 358,434
Settlements (10,520) (94,640) (84,942)
Lapse of statute of limitations (3,428) (888) (803)
Unrecognized tax benefits balance at December 31 $727,367 $695,285 $1,023,626
The remaining balances are recorded on the Company’s consolidated balance sheets as follows (in
thousands):
December 31,
2013 2014
Total unrecognized tax benefits balance $695,285 $1,023,626
Amounts netted against related deferred tax assets (89,048) (53,500)
Unrecognized tax benefits recorded on consolidated balance sheets $606,237 $ 970,126
Amounts classified as accrued expenses and other current liabilities $ — $ 2,179
Amounts classified as deferred and other long-term tax liabilities, net 606,237 967,947
Unrecognized tax benefits recorded on consolidated balance sheets $606,237 $ 970,126
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