PETM » Topics » Income Taxes

These excerpts taken from the PETM 10-K filed Mar 26, 2009.
Income Taxes
 
We establish deferred income tax assets and liabilities for temporary differences between the financial reporting bases and the income tax bases of our assets and liabilities at enacted tax rates expected to be in effect when such assets or liabilities are realized or settled. We record a valuation allowance on the deferred income tax assets to reduce the total to an amount we believe is more likely than not to be realized. Valuation allowances at February 1, 2009, and February 3, 2008, were principally to offset certain deferred income tax assets for net operating and capital loss carryforwards.
 
As of January 29, 2007, we adopted FASB Interpretation, or “FIN,” No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109,” which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN No. 48, the tax benefit from an uncertain tax position may be recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information. Although we believe the estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals.
 
We operate in multiple tax jurisdictions and could be subject to audit in any of these jurisdictions. These audits can involve complex issues that may require an extended period of time to resolve and may cover multiple years.


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Table of Contents

Income
Taxes



 



We establish deferred income tax assets and liabilities for
temporary differences between the financial reporting bases and
the income tax bases of our assets and liabilities at enacted
tax rates expected to be in effect when such assets or
liabilities are realized or settled. We record a valuation
allowance on the deferred income tax assets to reduce the total
to an amount we believe is more likely than not to be realized.
Valuation allowances at February 1, 2009, and
February 3, 2008, were principally to offset certain
deferred income tax assets for net operating and capital loss
carryforwards.


 



As of January 29, 2007, we adopted FASB Interpretation, or
“FIN,” No. 48, “Accounting for
Uncertainty in Income Taxes — an Interpretation of
FASB Statement No. 109,”
which addresses the
determination of whether tax benefits claimed or expected to be
claimed on a tax return should be recorded in the financial
statements. Under FIN No. 48, the tax benefit from an
uncertain tax position may be recognized only if it is more
likely than not that the tax position will be sustained on
examination by the taxing authorities. The determination is
based on the technical merits of the position and presumes that
each uncertain tax position will be examined by the relevant
taxing authority that has full knowledge of all relevant
information. Although we believe the estimates are reasonable,
no assurance can be given that the final outcome of these
matters will not be different than what is reflected in the
historical income tax provisions and accruals.


 



We operate in multiple tax jurisdictions and could be subject to
audit in any of these jurisdictions. These audits can involve
complex issues that may require an extended period of time to
resolve and may cover multiple years.





27





Table of Contents







Income Taxes
 
We establish deferred income tax assets and liabilities for temporary differences between the financial reporting bases and the income tax bases of our assets and liabilities at enacted tax rates expected to be in effect when such assets or liabilities are realized or settled. We record a valuation allowance on the deferred income tax assets to reduce the total to an amount we believe is more likely than not to be realized. Valuation allowances at February 1, 2009, and February 3, 2008, were principally to offset deferred income tax assets for net operating loss carryforwards.
 
As of January 29, 2007, we adopted FASB Interpretation, or “FIN,” No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109,” which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN No. 48, the tax benefit from an uncertain tax position may be recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information. Although we believe the estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals.
 
We operate in multiple tax jurisdictions and could be subject to audit in any of these jurisdictions. These audits can involve complex issues that may require an extended period of time to resolve and may cover multiple years.


F-10


Table of Contents

 
PetSmart, Inc. and Subsidiaries
 
Notes to Consolidated Financial Statements — (Continued)
 
Income
Taxes



 



We establish deferred income tax assets and liabilities for
temporary differences between the financial reporting bases and
the income tax bases of our assets and liabilities at enacted
tax rates expected to be in effect when such assets or
liabilities are realized or settled. We record a valuation
allowance on the deferred income tax assets to reduce the total
to an amount we believe is more likely than not to be realized.
Valuation allowances at February 1, 2009, and
February 3, 2008, were principally to offset deferred
income tax assets for net operating loss carryforwards.


 



As of January 29, 2007, we adopted FASB Interpretation, or
“FIN,” No. 48, “Accounting for
Uncertainty in Income Taxes — an Interpretation of
FASB Statement No. 109,”
which addresses the
determination of whether tax benefits claimed or expected to be
claimed on a tax return should be recorded in the financial
statements. Under FIN No. 48, the tax benefit from an
uncertain tax position may be recognized only if it is more
likely than not that the tax position will be sustained on
examination by the taxing authorities. The determination is
based on the technical merits of the position and presumes that
each uncertain tax position will be examined by the relevant
taxing authority that has full knowledge of all relevant
information. Although we believe the estimates are reasonable,
no assurance can be given that the final outcome of these
matters will not be different than what is reflected in the
historical income tax provisions and accruals.


 



We operate in multiple tax jurisdictions and could be subject to
audit in any of these jurisdictions. These audits can involve
complex issues that may require an extended period of time to
resolve and may cover multiple years.





F-10





Table of Contents





 




PetSmart,
Inc. and Subsidiaries




 




Notes to
Consolidated Financial
Statements — (Continued)


 




These excerpts taken from the PETM 10-K filed Mar 31, 2008.
Income Taxes
 
We establish deferred income tax assets and liabilities for temporary differences between the financial reporting bases and the income tax bases of our assets and liabilities at enacted tax rates expected to be in effect when such assets or liabilities are realized or settled. We record a valuation allowance on the deferred income tax assets to reduce the total to an amount we believe is more likely than not to be realized. Valuation allowances at February 3, 2008 and January 28, 2007, were principally to offset certain deferred income tax assets for net operating and capital loss carryforwards.
 
As of January 29, 2007, we adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109,” or FIN 48. FIN 48 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, the tax benefit from an uncertain tax position may be recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information. Although we believe the estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals.
 
We operate in multiple tax jurisdictions and could be subject to audit in any of these jurisdictions. These audits can involve complex issues that may require an extended period of time to resolve and may cover multiple years.
 
Income
Taxes



 



We establish deferred income tax assets and liabilities for
temporary differences between the financial reporting bases and
the income tax bases of our assets and liabilities at enacted
tax rates expected to be in effect when such assets or
liabilities are realized or settled. We record a valuation
allowance on the deferred income tax assets to reduce the total
to an amount we believe is more likely than not to be realized.
Valuation allowances at February 3, 2008 and
January 28, 2007, were principally to offset certain
deferred income tax assets for net operating and capital loss
carryforwards.


 



As of January 29, 2007, we adopted FASB Interpretation
No. 48, “Accounting for Uncertainty in Income
Taxes — an Interpretation of FASB Statement
No. 109,”
or FIN 48. FIN 48 addresses
the determination of whether tax benefits claimed or expected to
be claimed on a tax return should be recorded in the financial
statements. Under FIN 48, the tax benefit from an uncertain
tax position may be recognized only if it is more likely than
not that the tax position will be sustained on examination by
the taxing authorities. The determination is based on the
technical merits of the position and presumes that each
uncertain tax position will be examined by the relevant taxing
authority that has full knowledge of all relevant information.
Although we believe the estimates are reasonable, no assurance
can be given that the final outcome of these matters will not be
different than what is reflected in the historical income tax
provisions and accruals.


 



We operate in multiple tax jurisdictions and could be subject to
audit in any of these jurisdictions. These audits can involve
complex issues that may require an extended period of time to
resolve and may cover multiple years.


 




This excerpt taken from the PETM 10-K filed Mar 28, 2007.
Income Taxes
 
The Company establishes deferred income tax assets and liabilities for temporary differences between the financial reporting bases and the income tax bases of assets and liabilities at enacted tax rates expected to be in effect when such assets or liabilities are realized or settled. The Company records a valuation allowance on the deferred income tax assets to reduce the total to an amount it believes is more likely than not to be realized. Valuation allowances at January 28, 2007 and January 29, 2006 were principally to offset certain deferred income tax assets for operating and capital loss carryforwards.
 
The Company accrues for potential income tax contingencies when it is probable that a liability to a taxing authority has been incurred and the amount of the liability can be reasonably estimated, based on its view of the likely outcomes of current and future audits. The Company adjusts its accrual for income tax contingencies for changes in circumstances and additional uncertainties, such as amendments to existing tax law, both legislated and concluded through the various jurisdictions’ tax court systems. If the amounts ultimately settled with tax authorities are greater than the accrued contingencies, the Company must record additional income tax expense in the period in which the assessment is determined. To the extent amounts are ultimately settled for less than the accrued contingencies, or the Company determines that a liability to a taxing authority is no longer probable, the Company reverses the contingency as a reduction of income tax expense in the period the determination is made.
 
The Company operates in multiple tax jurisdictions and could be subject to audit in any of these jurisdictions. These audits can involve complex issues that may require an extended period of time to resolve and may cover multiple years.


F-11


Table of Contents

 
PetSmart, Inc. and Subsidiaries
 
Notes to Consolidated Financial Statements — (Continued)

 
This excerpt taken from the PETM 10-K filed Apr 10, 2006.
Income Taxes
 
The Company establishes deferred income tax assets and liabilities for temporary differences between the financial reporting bases and the income tax bases of assets and liabilities at enacted tax rates expected to be in effect when such assets or liabilities are realized or settled. The Company records a valuation allowance on the deferred income tax assets to reduce the total to an amount it believes is more likely than not to be realized. Valuation allowances at January 29, 2006 and January 30, 2005 were principally to offset certain deferred income tax assets for operating and capital loss carryforwards.
 
During the third quarter of fiscal 2005, the Company recorded a reduction to income tax expense of approximately $6,111,000. The period of assessment, during which additional tax may be imposed for years prior to 2002, has expired for several jurisdictions. As a result, the Company has determined that approximately $6,503,000 of tax contingency reserves are no longer probable of assertion and has reduced them accordingly, with approximately $6,111,000 as a reduction in expense and approximately $392,000 as an increase to additional paid-in capital. The Company also recorded additional tax expense during the third quarter of fiscal 2005 of approximately $2,314,000 resulting from a correction of its deferred tax assets related to equity-based compensation recognized for periods prior to fiscal 2002. In the fourth quarter of 2005, the Company recorded additional tax expense of $2,000,000 resulting from an adjustment to deferred tax assets and liabilities.
 
In the second quarter of fiscal 2004, the Company completed an analysis of net operating loss carryovers related to the purchase of PetSmart.com in fiscal 2000, based on Internal Revenue Service guidance. As a result, the Company expects to utilize an additional $22,100,000 of net operating losses previously considered unavailable. The Company recorded a total tax benefit of $7,700,000 in the second quarter of fiscal 2004 related to the additional net operating loss utilization.
 
The Company operates in multiple tax jurisdictions and could be subject to audit in any of these jurisdictions. These audits can involve complex issues that may require an extended period of time to resolve and may cover multiple years. The Internal Revenue Service is currently examining the Company’s tax returns for fiscal 2002, 2003 and 2004. While the examination has not been finalized, no issues have been identified that would have a material impact on the Company’s financial position or results of operations.
 
During fiscal 2005, the Company raised an affirmative issue with the Internal Revenue Service with respect to the characterization of certain losses. Final agreement has not been reached with the Internal Revenue Service on this issue and, therefore, no benefit has been reflected in the consolidated financial statements related to this item. Management currently estimates that the range of potential benefit will be between zero and approximately $1,900,000. Any amount ultimately sustained would be reflected as a reduction of income tax expense in the fiscal quarter in which final agreement is reached with the Internal Revenue Service.


F-11


Table of Contents

 
PetSmart, Inc. and Subsidiaries
 
Notes to Consolidated Financial Statements — (Continued)

 
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