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Income Taxes | 3 Months Ended
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Apr. 02, 2017
Income Taxes | Q. INCOME TAXES The effective tax rate for the three months ended April 2, 2017 and April 3, 2016 was 7.4% and 12.6%, respectively. The decrease in the effective tax rate from the three months ended April 3, 2016 to the three months ended April 2, 2017 resulted from an increase in the discrete benefit from stock based compensation, a projected shift in the geographic distribution of income which decreased income subject to taxation in the U.S. relative to lower tax rate jurisdictions and a decrease in the discrete benefit from non-taxable foreign exchange gains. The effective tax rates for the three months ended April 2, 2017 and April 3, 2016 differed from the expected federal statutory rate of 35% primarily because of the favorable effect of statutory rates applicable to income earned outside the United States. The tax rate for the three months ended April 2, 2017 and April 3, 2016 was also reduced by the benefit from U.S. research and development tax credits, partially offset by additions to the uncertain tax positions for transfer pricing, both of which are included in the projected annual effective tax rate. Discrete tax benefits recorded in the three months ended April 2, 2017 amounted to $7.0 million of which $5.5 million resulted from stock based compensation, $0.7 million related to U.S. research and development tax credits and $0.8 million from other discrete tax benefits. The $5.5 million of discrete benefit from stock based compensation included $5.2 million of excess tax benefits recognized pursuant to ASU No. 2016-09 “Improvements to Employee Share-Based Payment Accounting.” Discrete tax benefits recorded in the three months ended April 3, 2016 amounted to $2.5 million of which $1.2 million resulted from non-taxable foreign exchange gains, $0.9 million related to marketable securities and $0.4 million from other discrete tax benefits. On a quarterly basis, Teradyne evaluates the realizability of the deferred tax assets by jurisdiction and assesses the need for a valuation allowance. As of April 2, 2017, Teradyne believes that it will ultimately realize the deferred tax assets recorded on the condensed consolidated balance sheet. However, should Teradyne believe that it is more-likely-than-not that the deferred tax assets would not be realized, the tax provision would increase in the period in which Teradyne determined that the realizability was not likely. Teradyne considers the probability of future taxable income and historical profitability, among other factors, in assessing the realizability of the deferred tax assets. As of April 2, 2017 and December 31, 2016, Teradyne had $40.7 million and $39.0 million, respectively, of reserves for uncertain tax positions. The $1.7 million net increase in reserves for uncertain tax positions is primarily composed of additions related to transfer pricing exposures and U.S. research and development tax credits. As of April 2, 2017, Teradyne estimates that it is reasonably possible that the balance of uncertain tax positions may decrease approximately $0.8 million in the next twelve months, as a result of a lapse of statutes of limitation. The estimated decrease is comprised primarily of reserves relating to U.S. research and development credits. Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of April 2, 2017 and December 31, 2016, $0.3 million and $0.4 million, respectively, of interest and penalties were accrued for uncertain tax positions. For the three months ended April 2, 2017, a benefit of $0.1 million was recorded for interest and penalties related to income tax items. For the three months ended April 3, 2016, an expense of $0.3 million was recorded for interest and penalties related to income tax items. Teradyne qualifies for a tax holiday in Singapore by fulfilling the requirements of an agreement with the Singapore Economic Development Board under which certain headcount and spending requirements must be met. The tax savings due to the tax holiday for the three months ended April 2, 2017 was $4.7 million, or $0.02 per diluted share. The tax savings due to the tax holiday for the three months ended April 3, 2016 was $2.6 million, or $0.01 per diluted share. The tax holiday is scheduled to expire on December 31, 2020.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
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