MAT » Topics » Income Taxes

These excerpts taken from the MAT 10-K filed Feb 24, 2010.

Income Taxes

 

Mattel’s effective tax rate on income before income taxes in 2009 was 19.9% as compared to 22.2% in 2008. The 2009 income tax provision includes net benefits of $28.8 million related to reassessments of prior years’ tax exposures based on the status of current audits in various jurisdictions around the world, settlements, and enacted tax law changes.

 

Mattel’s effective tax rate on income before income taxes in 2008 was 22.2% as compared to 14.7% in 2007. The 2007 income tax provision includes net benefits of $42.0 million related to reassessments of prior years’ tax exposures based on the status of audits in various jurisdictions around the world, including settlements, partially offset by enacted tax law changes.

 

Income Taxes

 

Mattel’s income tax provision and related income tax assets and liabilities are based on actual and expected future income, US and foreign statutory income tax rates, and tax regulations and planning opportunities in the various jurisdictions in which Mattel operates. Management believes that the accounting estimate related to income taxes is a “critical accounting estimate” because significant judgment is required in interpreting tax regulations in the US and in foreign jurisdictions, evaluating Mattel’s worldwide uncertain tax positions, and assessing the likelihood of realizing certain tax benefits. Actual results could differ materially from those judgments, and changes in judgments could materially affect Mattel’s consolidated financial statements.

 

Certain income and expense items are accounted for differently for financial reporting and income tax purposes. As a result, the tax expense reflected in Mattel’s consolidated statements of operations is different than that reported in Mattel’s tax returns filed with the taxing authorities. Some of these differences are permanent, such as expenses that are not deductible in Mattel’s tax return, and some differences reverse over time, such as depreciation expense. These timing differences create deferred income tax assets and liabilities. Deferred income tax assets generally represent items that can be used as a tax deduction or credit in Mattel’s tax returns in future years for which Mattel has already recorded a tax benefit in its consolidated statement of operations. Mattel records a valuation allowance to reduce its deferred income tax assets if, based on the weight of available evidence, management believes expected future taxable income is not likely to support the use of a deduction or credit in that jurisdiction. Management evaluates the level of Mattel’s valuation allowances at least annually, and more frequently if actual operating results differ significantly from forecasted results.

 

Mattel records unrecognized tax benefits for US federal, state, local, and foreign tax positions related primarily to transfer pricing, tax credits claimed, tax nexus and apportionment. For each reporting period, management applies a consistent methodology to measure unrecognized tax benefits and all unrecognized tax benefits are reviewed periodically and adjusted as circumstances warrant. Mattel’s measurement of its unrecognized tax benefits is based on management’s assessment of all relevant information, including prior audit experience, the status of current audits, conclusions of tax audits, lapsing of applicable statutes of limitations, identification of new issues, and any administrative guidance or developments. Mattel recognizes unrecognized tax benefits in the first financial reporting period in which information becomes available indicating that such benefits will more-likely-than-not be realized.

 

The 2009 income tax provision includes net tax benefits of $28.8 million related to reassessments of prior years’ tax exposures based on the status of current audits in various jurisdictions around the world, settlements, and enacted tax law changes. The 2007 income tax provision includes net tax benefits of $42.0 million related to reassessments of prior years’ tax exposures based on the status of audits in various jurisdictions around the world, including settlements, partially offset by enacted tax law changes.

 

In the normal course of business, Mattel is regularly audited by federal, state, local, and foreign tax authorities. The ultimate settlement of any particular issue with the applicable taxing authority could have a material impact on Mattel’s consolidated financial statements.

 

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Income Taxes

 

Certain income and expense items are accounted for differently for financial reporting and income tax purposes. Deferred income tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, applying enacted statutory income tax rates in effect for the year in which the differences are expected to reverse.

 

In the normal course of business, Mattel is regularly audited by federal, state, local, and foreign tax authorities. The ultimate settlement of any particular issue with the applicable taxing authority could have a material impact on Mattel’s consolidated financial statements.

 

These excerpts taken from the MAT 10-K filed Feb 26, 2009.

Income Taxes

 

Mattel’s effective tax rate on income before income taxes in 2008 was 22.2% as compared to 14.7% in 2007. The 2007 income tax provision includes net benefits of $42.0 million related to reassessments of tax exposures based on the status of current audits in various jurisdictions around the world, including settlements, partially offset by enacted tax law changes.

 

The 2006 income tax provision includes a benefit of $63.0 million related to settlements with foreign and state tax authorities. Of the total benefit recorded in 2006, $57.5 million represents refunds of previously paid taxes, recorded as an expense in previous years. These refunds were recorded as a reduction to income tax expense in the period the refunds were received by Mattel. The balance of the tax benefit recorded in 2006 was a net reduction to total income tax reserves resulting from tax settlements with foreign and state tax authorities.

 

Income Taxes

 

STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%">Mattel’s effective tax rate on income before income taxes in 2008 was 22.2% as compared to 14.7% in 2007. The 2007 income tax provision includes net
benefits of $42.0 million related to reassessments of tax exposures based on the status of current audits in various jurisdictions around the world, including settlements, partially offset by enacted tax law changes.

STYLE="margin-top:0px;margin-bottom:0px"> 

The 2006 income tax provision includes a benefit of $63.0 million related to
settlements with foreign and state tax authorities. Of the total benefit recorded in 2006, $57.5 million represents refunds of previously paid taxes, recorded as an expense in previous years. These refunds were recorded as a reduction to income tax
expense in the period the refunds were received by Mattel. The balance of the tax benefit recorded in 2006 was a net reduction to total income tax reserves resulting from tax settlements with foreign and state tax authorities.

STYLE="margin-top:0px;margin-bottom:0px"> 

Income Taxes

 

Mattel’s income tax provision and related income tax assets and liabilities are based on actual and expected future income, US and foreign statutory income tax rates, and tax regulations and planning opportunities in the various jurisdictions in which Mattel operates. Management believes that the accounting estimate related to income taxes is a “critical accounting estimate” because significant judgment is required in interpreting tax regulations in the US and in foreign jurisdictions, evaluating Mattel’s worldwide uncertain tax positions, and assessing the likelihood of realizing certain tax benefits. Actual results could differ materially from those judgments, and changes in judgments could materially affect Mattel’s consolidated financial statements.

 

Certain income and expense items are accounted for differently for financial reporting and income tax purposes. As a result, the tax expense reflected in Mattel’s consolidated statements of operations is different than that reported in Mattel’s tax returns filed with the taxing authorities. Some of these differences are permanent, such as expenses that are not deductible in Mattel’s tax return, and some differences reverse over time, such as depreciation expense. These timing differences create deferred income tax assets and liabilities. Deferred income tax assets generally represent items that can be used as a tax deduction or credit in Mattel’s tax returns in future years for which Mattel has already recorded a tax benefit in its consolidated statement of operations. Mattel records a valuation allowance to reduce its deferred income tax assets if, based on the weight of available evidence, management believes expected future taxable income is not likely to support the use of a deduction or credit in that jurisdiction. Management evaluates the level of Mattel’s valuation allowances at least annually, and more frequently if actual operating results differ significantly from forecasted results.

 

In 2007, Mattel adopted FIN 48, which clarifies the accounting for income taxes by prescribing the minimum recognition threshold an uncertain tax position is required to meet before tax benefits associated with such uncertain tax positions are recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 excludes income taxes from the scope of SFAS No. 5, Accounting for Contingencies. FIN 48 also requires that amounts recognized in the balance sheet related to uncertain tax positions be classified as a current or noncurrent liability, based upon the expected timing of the payment to a taxing authority.

 

Mattel records unrecognized tax benefits for US federal, state, local, and foreign tax positions related primarily to transfer pricing, tax credits claimed, tax nexus and apportionment. For each reporting period, management applies a consistent methodology to measure unrecognized tax benefits and all unrecognized tax benefits are reviewed periodically and adjusted as circumstances warrant. Mattel’s measurement of its unrecognized tax benefits is based on management’s assessment of all relevant information, including prior audit experience, the status of current audits, conclusions of tax audits, lapsing of applicable statutes of limitations, identification of new issues, and any administrative guidance or developments. Mattel recognizes unrecognized tax benefits in the first financial reporting period in which information becomes available indicating that such benefits will more-likely-than-not be realized.

 

The 2007 income tax provision includes net benefits of $42.0 million related to reassessments of tax exposures based on the status of current audits in various jurisdictions around the world, including settlements, partially offset by enacted tax law changes.

 

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In 2006, Mattel recognized total tax benefits of $63.0 million related to settlements and refunds of ongoing audits with foreign and state tax authorities. Of the $63.0 million of total tax benefit recorded, $57.5 million represents refunds of previously paid taxes, which was recorded as an expense in previous years. Accordingly, these refunds were recorded as a reduction to income tax expense in the period the refunds were received by Mattel. The remainder of the tax benefit recorded in 2006 is a net reduction to total income tax reserves resulting from tax settlements with foreign and state tax authorities.

 

In the normal course of business, Mattel is regularly audited by federal, state, local, and foreign tax authorities. The ultimate settlement of any particular issue with the applicable taxing authority could have a material impact on Mattel’s consolidated financial statements.

 

Income Taxes

STYLE="margin-top:0px;margin-bottom:-6px"> 

Mattel’s income tax provision and related income tax assets and
liabilities are based on actual and expected future income, US and foreign statutory income tax rates, and tax regulations and planning opportunities in the various jurisdictions in which Mattel operates. Management believes that the accounting
estimate related to income taxes is a “critical accounting estimate” because significant judgment is required in interpreting tax regulations in the US and in foreign jurisdictions, evaluating Mattel’s worldwide uncertain tax
positions, and assessing the likelihood of realizing certain tax benefits. Actual results could differ materially from those judgments, and changes in judgments could materially affect Mattel’s consolidated financial statements.

STYLE="margin-top:0px;margin-bottom:0px"> 

Certain income and expense items are accounted for differently for financial
reporting and income tax purposes. As a result, the tax expense reflected in Mattel’s consolidated statements of operations is different than that reported in Mattel’s tax returns filed with the taxing authorities. Some of these
differences are permanent, such as expenses that are not deductible in Mattel’s tax return, and some differences reverse over time, such as depreciation expense. These timing differences create deferred income tax assets and liabilities.
Deferred income tax assets generally represent items that can be used as a tax deduction or credit in Mattel’s tax returns in future years for which Mattel has already recorded a tax benefit in its consolidated statement of operations. Mattel
records a valuation allowance to reduce its deferred income tax assets if, based on the weight of available evidence, management believes expected future taxable income is not likely to support the use of a deduction or credit in that jurisdiction.
Management evaluates the level of Mattel’s valuation allowances at least annually, and more frequently if actual operating results differ significantly from forecasted results.

SIZE="1"> 

In 2007, Mattel adopted FIN 48, which clarifies the accounting for income taxes by prescribing the minimum recognition
threshold an uncertain tax position is required to meet before tax benefits associated with such uncertain tax positions are recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification,
interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 excludes income taxes from the scope of SFAS No. 5, Accounting for Contingencies. FIN 48 also requires that amounts recognized in the balance sheet
related to uncertain tax positions be classified as a current or noncurrent liability, based upon the expected timing of the payment to a taxing authority.

 

STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%">Mattel records unrecognized tax benefits for US federal, state, local, and foreign tax positions related primarily to transfer pricing, tax credits
claimed, tax nexus and apportionment. For each reporting period, management applies a consistent methodology to measure unrecognized tax benefits and all unrecognized tax benefits are reviewed periodically and adjusted as circumstances warrant.
Mattel’s measurement of its unrecognized tax benefits is based on management’s assessment of all relevant information, including prior audit experience, the status of current audits, conclusions of tax audits, lapsing of applicable
statutes of limitations, identification of new issues, and any administrative guidance or developments. Mattel recognizes unrecognized tax benefits in the first financial reporting period in which information becomes available indicating that such
benefits will more-likely-than-not be realized.

 

The 2007
income tax provision includes net benefits of $42.0 million related to reassessments of tax exposures based on the status of current audits in various jurisdictions around the world, including settlements, partially offset by enacted tax law
changes.

 


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In 2006, Mattel recognized total tax benefits of $63.0 million related to settlements and refunds of
ongoing audits with foreign and state tax authorities. Of the $63.0 million of total tax benefit recorded, $57.5 million represents refunds of previously paid taxes, which was recorded as an expense in previous years. Accordingly, these refunds were
recorded as a reduction to income tax expense in the period the refunds were received by Mattel. The remainder of the tax benefit recorded in 2006 is a net reduction to total income tax reserves resulting from tax settlements with foreign and state
tax authorities.

 

In the normal course of business, Mattel is
regularly audited by federal, state, local, and foreign tax authorities. The ultimate settlement of any particular issue with the applicable taxing authority could have a material impact on Mattel’s consolidated financial statements.

 

Income Taxes

 

Certain income and expense items are accounted for differently for financial reporting and income tax purposes. Deferred income tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, applying enacted statutory income tax rates in effect for the year in which the differences are expected to reverse.

 

In 2007, Mattel adopted FASB Interpretation No. (“FIN”) 48, Accounting for Uncertainty in Income Taxes, an interpretation of SFAS No. 109. FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold an uncertain tax position is required to meet before tax benefits associated with such uncertain tax positions are recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 excludes income taxes from the scope of SFAS No. 5, Accounting for Contingencies. FIN 48 also requires that amounts recognized in the balance sheet related to uncertain tax positions be classified as a current or noncurrent liability, based upon the expected timing of the payment to a taxing authority.

 

In the normal course of business, Mattel is regularly audited by federal, state, local, and foreign tax authorities. The ultimate settlement of any particular issue with the applicable taxing authority could have a material impact on Mattel’s consolidated financial statements.

 

This excerpt taken from the MAT 10-Q filed Oct 24, 2008.

Income Taxes

Mattel’s provision for income taxes was $59.0 million for the first nine months of 2008 as compared to $88.3 million for the first nine months of 2007. Mattel’s effective income tax rate for the first nine months of 2008 was 22.5%. During the first nine months of 2007, Mattel recognized tax expense of $5.3 million related to a change in a New York state tax law.

This excerpt taken from the MAT 10-Q filed Jul 24, 2008.

Income Taxes

Mattel had an income tax benefit of $10.0 million for the first half of 2008, compared to a provision for income taxes of $17.3 million for the first half of 2007. Mattel’s effective income tax rate for the first half of 2008 was 22.3%, which is its expected effective income tax rate for full year 2008. During the second quarter of 2007, the state of New York enacted corporate tax law changes, effective retroactive to January 1, 2007, reducing its corporate tax rate from 7.5% to 7.1% and modifying its method of apportioning income to a single weighted sales factor. As a result of the law changes, Mattel’s effective New York state tax rate decreased, resulting in a reduction of $5.3 million to previously recorded deferred tax assets during the three months ended June 30, 2007.

These excerpts taken from the MAT 10-K filed Feb 26, 2008.

Income Taxes

 

Certain income and expense items are accounted for differently for financial reporting and income tax purposes. Deferred income tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, applying enacted statutory income tax rates in effect for the year in which the differences are expected to reverse.

 

Effective January 1, 2007, Mattel adopted FASB Interpretation No. (“FIN”) 48, Accounting for Uncertainty in Income Taxes, an interpretation of SFAS No. 109. FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold an uncertain tax position is required to meet before tax benefits associated with such uncertain tax positions are recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 excludes income taxes from the scope of SFAS No. 5, Accounting for Contingencies. FIN 48 also requires that amounts recognized in the balance sheet related to uncertain tax positions be classified as a current or noncurrent liability, based upon the expected timing of the payment to a taxing authority.

 

Prior to January 1, 2007, Mattel recorded reserves related to uncertain tax positions as a current liability, whereas upon adoption of FIN 48, Mattel reclassified tax reserves related to uncertain tax positions for which a cash tax payment is not expected within the next twelve months to noncurrent liabilities. Mattel’s adoption of FIN 48 did not require a cumulative effect adjustment to the opening balance of its retained earnings. Mattel classifies interest and penalties related to unrecognized tax benefits as a component of income tax expense.

 

Income Taxes

 

STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%">Certain income and expense items are accounted for differently for financial reporting and income tax purposes. Deferred income tax assets and liabilities
are determined based on the difference between the financial statement and tax bases of assets and liabilities, applying enacted statutory income tax rates in effect for the year in which the differences are expected to reverse.

STYLE="margin-top:0px;margin-bottom:0px"> 

Effective January 1, 2007, Mattel adopted FASB Interpretation No.
(“FIN”) 48, Accounting for Uncertainty in Income Taxes, an interpretation of SFAS No. 109. FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold an uncertain tax position is required
to meet before tax benefits associated with such uncertain tax positions are recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods,
disclosure and transition. FIN 48 excludes income taxes from the scope of SFAS No. 5, Accounting for Contingencies. FIN 48 also requires that amounts recognized in the balance sheet related to uncertain tax positions be classified as a
current or noncurrent liability, based upon the expected timing of the payment to a taxing authority.

 

STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%">Prior to January 1, 2007, Mattel recorded reserves related to uncertain tax positions as a current liability, whereas upon adoption of FIN 48, Mattel
reclassified tax reserves related to uncertain tax positions for which a cash tax payment is not expected within the next twelve months to noncurrent liabilities. Mattel’s adoption of FIN 48 did not require a cumulative effect adjustment to the
opening balance of its retained earnings. Mattel classifies interest and penalties related to unrecognized tax benefits as a component of income tax expense.

 

STYLE="margin-top:0px;margin-bottom:0px">Net Income Per Common Share

 

STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%">Basic net income per common share is computed by dividing reported net income by the weighted average number of common shares, outstanding during each
period.

 

Diluted net income per common share is computed by
dividing reported net income by the weighted average number of common and potential common shares outstanding during each period. The calculation of potential common shares assumes the exercise of dilutive stock options, net of assumed treasury
share repurchases at average market prices, as applicable. Nonqualified stock options totaling 3.2 million, 22.0 million, and 27.6 million were excluded from the calculation of diluted net income per common share for 2007, 2006, and
2005, respectively, because they were anti-dilutive.

 

A
reconciliation of weighted average shares for the years ended December 31 is as follows:

 








































































   2007  2006  2005
   (In thousands)

Common shares

  384,450  382,921  407,402

Effect of dilutive securities:

      

Stock options and restricted stock

  6,162  3,501  3,637
         

Common and potential common shares

  390,612  386,422  411,039
         

 

This excerpt taken from the MAT 10-Q filed Oct 26, 2007.

Income Taxes

During the first nine months of 2007, Mattel recognized tax expense of $5.3 million related to enacted New York corporate tax law changes. During the first nine months of 2006, Mattel recognized income tax benefits of $63.0 million as a result of settlements with foreign and state tax authorities and income tax benefits of $6.0 million related to a pre-tax charge of $19.3 million for prior period unintentional stock option accounting

 

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errors. Mattel’s provision for income taxes could be positively or negatively impacted by the results of routine audits by federal, state, and foreign tax authorities and enacted income tax legislation by federal, state, and foreign governments.

This excerpt taken from the MAT 10-Q filed Aug 3, 2007.

Income Taxes

 

During the second quarter of 2007, the state of New York enacted corporate tax law changes, effective retroactive to January 1, 2007, reducing its corporate tax rate from 7.5% to 7.1% and modifying its method of apportioning income to a single weighted sales factor. As a result of the law changes, Mattel’s effective New York state tax rate decreased, resulting in a reduction of $5.3 million to previously recorded deferred tax assets during the three months ended June 30, 2007. Mattel’s effective tax rate for 2007 is expected to be approximately 24% to 25%, which could be positively or negatively impacted by the results of routine audits by federal, state, and foreign tax authorities.

 

During the first half of 2006, Mattel recognized income tax benefits of $63.0 million related to settlements with taxing authorities, including $56.8 million as a result of settlements with foreign tax authorities during the first quarter of 2006 and $6.2 million, primarily due to a settlement with a state tax authority for tax years 1997 and 1998 during the second quarter of 2006.

 

This excerpt taken from the MAT 10-Q filed May 3, 2007.

Income Taxes

 

During the three months ended March 31, 2006, Mattel settled multiple ongoing audits by foreign tax authorities and as a result of the settlements, Mattel recognized income tax benefits of $56.8 million during the first quarter of 2006.

 

This excerpt taken from the MAT 10-K filed Feb 26, 2007.

Income Taxes

 

Certain income and expense items are accounted for differently for financial reporting and income tax purposes. Deferred income tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, applying enacted statutory income tax rates in effect for the year in which the differences are expected to reverse.

 

This excerpt taken from the MAT 10-Q filed Nov 2, 2006.

Income Taxes

 

In the normal course of business, Mattel is regularly audited by federal, state and foreign tax authorities. During the three months ended March 31, 2006, Mattel settled ongoing audits by foreign tax authorities and as a result of the settlements, Mattel recognized income tax benefits of $56.8 million during the first quarter of 2006. During the three months ended June 30, 2006, Mattel recognized income tax benefits of $6.2 million primarily due to a settlement with a state tax authority for tax years 1997 and 1998.

 

On May 17, 2006, the Tax Increase Prevention and Reconciliation Act (the “Tax Act”) was signed into law. Management expects the Tax Act to lower Mattel’s 2006 provision for income taxes by approximately 3 to 4 percentage points. Future law changes by Congress or guidance from the Internal Revenue Service with respect to these new rules may further impact Mattel’s estimates and could require further adjustments to future tax provisions. The impact of such future changes, if any, will be reflected in the financial reporting period in which any such change is enacted or becomes effective.

 

During the three months ended September 30, 2006, income tax benefits of $6.0 million were recorded relating to a pre-tax charge of $19.3 million for prior period unintentional stock option accounting errors. See Item 1 “Financial Statements – Note 16 to Consolidated Financial Statements.”

 

The consolidated statements of operations for the nine months ended September 30, 2005 included a provision for income taxes of $112.9 million for the total amount of earnings repatriated under the American Jobs Creation Act (the “Jobs Act”), which was signed into law on October 22, 2004. Among its various provisions, the Jobs Act created a temporary incentive for US corporations to repatriate accumulated income earned abroad by providing an 85% dividends received deduction for certain dividends from controlled foreign corporations. In the fourth quarter of 2005, management changed its estimate of the tax liability associated with the repatriated earnings to $107.0 million and recorded the $5.9 million adjustment to the provision for income taxes in that period.

 

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This excerpt taken from the MAT 10-Q filed Aug 2, 2006.

Income Taxes

 

In the normal course of business, Mattel is regularly audited by federal, state and foreign tax authorities. During the three months ended March 31, 2006, Mattel settled multiple ongoing audits by foreign tax authorities and as a result of the settlements, Mattel recognized income tax benefits of $56.8 million during the first quarter of 2006. During the three months ended June 30, 2006, Mattel recognized income tax benefits of $6.2 million primarily due to a settlement with a state tax authority for tax years 1997 and 1998.

 

On May 17, 2006, the Tax Increase Prevention and Reconciliation Act (the “Tax Act”) was signed into law. Management expects the Tax Act to lower Mattel’s 2006 provision for income taxes by approximately 3 to 4 percentage points. The provision for income taxes for the three months ended June 30, 2006 was calculated based on the new lower expected tax rate for fiscal year 2006, and also included an appropriate net catch-up adjustment of $1.6 million. This adjustment was necessary to appropriately adjust the tax provision for the six months ended June 30, 2006 to the lower expected annual tax rate. Future law changes by Congress or guidance from the Internal Revenue Service with respect to these new rules may further impact Mattel’s estimates and could require further adjustments to future tax provisions. The impact of such future changes, if any, will be reflected in the financial reporting period in which any such change is enacted or becomes effective.

 

The consolidated statements of operations for the three and six months ended June 30, 2005 included a provision for income taxes of $112.9 million for the total amount of earnings repatriated under the American Jobs Creation Act (the “Jobs Act”), which was signed into law on October 22, 2004. Among its various provisions, the Jobs Act created a temporary incentive for US corporations to repatriate accumulated income earned abroad by providing an 85% dividends received deduction for certain dividends from controlled foreign corporations. In the fourth quarter of 2005, management changed its estimate of the tax liability associated with the repatriated earnings to $107.0 million and recorded the $5.9 million adjustment to the provision for income taxes in that period.

 

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This excerpt taken from the MAT 10-Q filed May 3, 2006.

Income Taxes

 

In the normal course of business, Mattel is regularly audited by federal, state and foreign tax authorities. During the first quarter of 2006, Mattel settled multiple on-going audits by foreign tax authorities and as a result of the settlements, Mattel recognized a tax benefit of $56.8 million.

 

Additionally, in April 2006, Mattel settled an audit with a state tax authority that resulted in a net tax benefit of $6.6 million, which will be recorded in Mattel’s financial statements in the second quarter of 2006.

 

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This excerpt taken from the MAT 10-K filed Feb 27, 2006.

Income Taxes

 

Certain income and expense items are accounted for differently for financial reporting and income tax purposes. Deferred income tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, applying enacted statutory income tax rates in effect for the year in which the differences are expected to reverse.

 

This excerpt taken from the MAT 10-Q filed Nov 3, 2005.

Income Taxes

 

On October 22, 2004, the Jobs Act was signed into law. Among its various provisions, the Jobs Act creates a temporary incentive for US corporations to repatriate accumulated income earned abroad by providing an 85% dividends received deduction for certain qualifying dividends. On December 21, 2004, the Financial Accounting Standards Board (“FASB”) issued Staff Position 109-2 (“FSP 109-2”), Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004. FSP 109-2 allows companies additional time beyond the financial reporting period in which the Jobs Act was enacted to evaluate the effect of the Jobs Act on a company’s plan for reinvestment or repatriation of unremitted foreign earnings for the purposes of applying SFAS No. 109, Accounting For Income Taxes.

 

Management’s plan for reinvestment and repatriation of foreign earnings under the Jobs Act was completed and approved by Robert A. Eckert, Mattel’s chief executive officer, on April 14, 2005. Mattel expects to repatriate up to approximately $2.4 billion in foreign earnings and has repatriated approximately $1.2 billion during the nine months ended September 30, 2005, with the remaining half to be repatriated by the end of this year. Management has identified several qualified uses for reinvestment of the foreign earnings repatriated under the Jobs Act, including employee compensation, hiring and training, research and development costs, and advertising and promotion expenses. Management believes that Mattel’s aggregate spending in these areas will satisfy the reinvestment spending requirements outlined in the safe harbor provision of the Jobs Act.

 

The statements of operations for the nine months ended September 30, 2005, include a provision for income taxes of $112.9 million for the total amount of earnings expected to be repatriated, which will occur throughout 2005. The tax provision may be further impacted by future law changes enacted by the US Congress or further guidance issued by the IRS. The impact of such future changes will be reflected in the financial reporting period in which any such change in law is enacted or becomes effective.

 

This excerpt taken from the MAT 10-Q filed Aug 3, 2005.

Income Taxes

 

On October 22, 2004, the Jobs Act was signed into law. Among its various provisions, the Jobs Act creates a temporary incentive for US corporations to repatriate accumulated income earned abroad by providing an 85% dividends received deduction for certain qualifying dividends. On December 21, 2004, the Financial Accounting Standards Board (“FASB”) issued Staff Position 109-2
(“FSP 109-2”), Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004. FSP 109-2 allows companies additional time beyond the financial reporting period in which the Jobs Act was enacted to evaluate the effect of the Jobs Act on a company’s plan for reinvestment or repatriation of unremitted foreign earnings for the purposes of applying SFAS No. 109, Accounting For Income Taxes.

 

Management’s plan for reinvestment and repatriation of foreign earnings under the Jobs Act was completed and approved by
Robert A. Eckert, Mattel’s chief executive officer, on April 14, 2005. Mattel expects to repatriate up to approximately $2.4 billion in foreign earnings. Management has identified several qualified uses for reinvestment of the foreign earnings repatriated under the Jobs Act, including employee compensation, hiring and training, research and development costs, and advertising and promotion expenses. Management believes that Mattel’s aggregate spending in these areas will satisfy the reinvestment spending requirements outlined in the safe harbor provision of the Jobs Act.

 

The statements of operations for the three- and six-months ended June 30, 2005, include a provision for income taxes of
$112.9 million for the total amount of earnings expected to be repatriated, which will occur throughout 2005. The computation of the income tax provision includes the favorable effects of guidance issued by the US Internal Revenue Service (“IRS”) on May 10, 2005. The tax provision may be further impacted by future law changes enacted by the US Congress or further guidance issued by the IRS. The impact of such future changes will be reflected in the financial reporting period in which any such change in law is enacted or becomes effective.

 

This excerpt taken from the MAT 10-Q filed May 4, 2005.

Income Taxes

 

On October 22, 2004, the American Jobs Creation Act (the “Jobs Act”) was signed into law. Among its various provisions, the Jobs Act creates a temporary incentive for US corporations to repatriate accumulated income earned abroad by providing an 85% dividends received deduction for certain qualifying dividends. On December 21, 2004, the Financial Accounting Standards Board (“FASB”) issued Staff Position 109-2 (“FSP 109-2”), Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004. FSP 109-2 allows companies additional time beyond the financial reporting period in which the Jobs Act was enacted to evaluate the effect of the Jobs Act on a company’s plan for reinvestment or repatriation of unremitted foreign earnings for the purposes of applying Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting For Income Taxes. As of March 31, 2005, management had not completed its assessment of whether, or to what extent, Mattel may repatriate foreign earnings under the Jobs Act. Therefore, the statement of income for the three-months ended March 31, 2005, does not include any provision for income taxes on the cumulative balance of its unremitted foreign earnings.

 

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Management’s plan for reinvestment and repatriation of foreign earnings under the Jobs Act was completed and approved by Robert A. Eckert, Mattel’s chief executive officer, on April 14, 2005. Mattel expects to repatriate up to approximately $2.4 billion in foreign earnings, and the corresponding tax liability is estimated to be approximately $180 million as calculated under existing law. The statement of income for the three-months ending June 30, 2005, will include a provision for income taxes on the total amount of earnings expected to be repatriated, which will occur throughout 2005. The computation of the estimated tax liability does not include the potential favorable effects of the Tax Technical Corrections Act of 2004 (the “Technical Corrections Bill”), which was introduced to the US Congress on November 22, 2004. If enacted in its current form, the Technical Corrections Bill would reduce Mattel’s computation of the estimated tax liability associated with the repatriation of foreign earnings under the Jobs Act. In addition, the estimated tax liability may be further impacted by any additional law change in the form of further guidance from the US Internal Revenue Service (“IRS”). Mattel would reflect the impact of the Technical Corrections Bill and any additional IRS guidance in the financial reporting period in which any such change in law is enacted or effective.

 

This excerpt taken from the MAT 10-K filed Mar 8, 2005.

Income Taxes

 

Certain income and expense items are accounted for differently for financial reporting and income tax purposes. Deferred income tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, applying enacted statutory income tax rates in effect for the year in which the differences are expected to reverse.

 

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