Riverbed Technology (RVBD)

Uncertain Income Tax Positions

Effective January 1, 2007, we adopted FIN 48. A reconciliation of the beginning and ending amount of the consolidated liability for unrecognized income tax benefits during the year is as follows:

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RIVERBED TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Included in the unrecognized tax benefits of $2.6 million at December 31, 2008 was approximately $1.8 million of tax benefits that, if recognized, would reduce our annual effective tax rate. We did not accrue for any interest and penalty associated with the uncertain tax position due to our prior net operating losses. Over the next 12 months, we expect our unrecognized tax benefits to be reduced by $820,000, upon receiving approval for a change in tax method of accounting, of which no part will reduce our annual effective tax rate. The statute of limitations for U.S. federal, state, and United Kingdom (UK) tax purposes are generally three, four, and three years respectively; however, we continue to carryover tax attributes prior to these periods for federal and state purposes, which would still be open for examination by the respective tax authorities. Accordingly, all years since our inception are open to tax examinations for federal and state purposes. Our UK tax returns from 2005 to the present remain open for examination.

Uncertain Income Tax Positions

FACE="ARIAL" SIZE="2">Effective January 1, 2007, we adopted FIN 48. A reconciliation of the beginning and ending amount of the consolidated liability for unrecognized income tax benefits during the year is as follows:

Uncertain Income Tax Positions

Effective January 1, 2007, we adopted FIN 48. A reconciliation of the beginning and ending amount of the consolidated liability for unrecognized income tax benefits during the year is as follows:

Included in the unrecognized tax benefits of $298,000 at December 31, 2007 was approximately $242,000 of tax benefits that, if recognized, would reduce our annual effective tax rate. We did not accrue for any interest and penalty associated with the uncertain tax position. We do not expect our unrecognized tax benefits to change significantly over the next 12 months. The statute of limitations for federal, state, and UK tax purposes are generally three, four, and three years respectively; however, we continue to carryover tax attributes prior to these periods for federal and state purposes, which would still be open for examination by the respective tax authorities. All years since our inception are open to tax examinations.