v2.4.0.6

Income Taxes | 12 Months Ended
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Dec. 31, 2012
Income Taxes | Note 6. Income Taxes Polaris’ Income before income taxes was generated from its United States and foreign operations as follows (in thousands):
|  | For the Years Ended December 31, |
|  | 2012 |  |  | 2011 |  |  | 2010 |
United States |  | $ | 458,635 |  |  | $ | 329,060 |  |  | $ | 210,155 |
Foreign |  |  | 21,208 |  |  |  | 17,566 |  |  |  | 8,386 |
Income before income taxes |  | $ | 479,843 |  |  | $ | 346,626 |  |  | $ | 218,541 |
Components of Polaris’ Provision for income taxes are as follows (in thousands):
|  | For the Years Ended December 31, |
|  | 2012 |  |  | 2011 |  |  | 2010 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 169,833 |  |  | $ | 113,406 |  |  | $ | 73,597 |
State |  |  | 15,366 |  |  |  | 10,629 |  |  |  | 7,381 |
Foreign |  |  | 8,593 |  |  |  | 6,374 |  |  |  | 6,783 |
Deferred |  |  | (26,259 | ) |  |  | (11,358 | ) |  |  | (16,358 | )
Total |  | $ | 167,533 |  |  | $ | 119,051 |  |  | $ | 71,403 |
Reconciliation of the Federal statutory income tax rate to the effective tax rate is as follows:
|  | For the Years Ended December 31, |
|  | 2012 |  |  | 2011 |  |  | 2010 |
Federal statutory rate |  |  | 35.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
State income taxes, net of federal benefit |  |  | 1.8 |  |  |  | 1.8 |  |  |  | 1.8 |
Domestic manufacturing deduction |  |  | (1.5 | ) |  |  | (1.9 | ) |  |  | (1.8 | )
Research tax credit |  |  | 0.0 |  |  |  | (0.8 | ) |  |  | (1.2 | )
Valuation allowance for foreign subsidiaries net operating losses |  |  | 0.0 |  |  |  | 0.5 |  |  |  | 0.4 |
Other permanent differences |  |  | (0.4 | ) |  |  | (0.3 | ) |  |  | (1.5 | )
Effective income tax rate |  |  | 34.9 | % |  |  | 34.3 | % |  |  | 32.7 | %
Subsequent to December 31, 2012, the United States President enacted the 2012 research and development tax credit. As a result, the impact of the 2012 research and development tax credit will be recorded in the first quarter 2013 tax provision. Polaris anticipates the impact of the tax credit will be consistent with the amount of tax credit recorded in prior years. Undistributed earnings relating to certain non-U.S. subsidiaries of approximately $56,812,000 and $44,643,000 at December 31, 2012 and 2011, respectively, are considered to be permanently reinvested; accordingly, no provision for U.S. federal income taxes has been provided thereon. If the Company were to distribute these earnings it would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits reflecting the amounts paid to non-U.S. taxing authorities) and withholding taxes payable to the non-U.S. countries. Determination of the unrecognized deferred U.S. income tax liability related to these undistributed earnings is not practicable due to the complexities associated with this hypothetical calculation. Polaris utilizes the liability method of accounting for income taxes whereby deferred taxes are determined based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of enacted tax laws. The net deferred income taxes consist of the following (in thousands):
|  | December 31, |
|  | 2012 |  |  | 2011 |
Current deferred income taxes: |  |  |  |  |  |  |  |
Inventories |  | $ | 7,277 |  |  | $ | 5,968 |
Accrued expenses |  |  | 78,164 |  |  |  | 73,171 |
Derivative instruments |  |  | 851 |  |  |  | (1,474 | )
Total current |  |  | 86,292 |  |  |  | 77,665 |
Noncurrent net deferred income taxes: |  |  |  |  |  |  |  |
Cost in excess of net assets of business acquired |  |  | 5,193 |  |  |  | 2,139 |
Property and equipment |  |  | (21,656 | ) |  |  | (21,627 | )
Compensation payable in common stock |  |  | 40,329 |  |  |  | 31,274 |
Net unrealized gains in other comprehensive income |  |  | (1,698 | ) |  |  | (1,516 | )
Net operating loss carryforwards |  |  | 4,744 |  |  |  | 4,243 |
Valuation allowance |  |  | (4,523 | ) |  |  | (3,912 | )
Total noncurrent |  |  | 22,389 |  |  |  | 10,601 |
Total |  | $ | 108,681 |  |  | $ | 88,266 |
At December 31, 2012, the Company had available unused international and acquired federal net operating loss carryforwards of $26,122,000. The net operating loss carryforwards will expire at various dates from 2013 to 2020. Polaris had liabilities recorded related to unrecognized tax benefits totaling $7,063,000 and $7,837,000 at December 31, 2012 and 2011, respectively. The liabilities were classified as Long term income taxes payable in the accompanying consolidated balance sheets in accordance with ASC Topic 740. Polaris recognizes potential interest and penalties related to income tax positions as a component of the Provision for income taxes on the consolidated statements of income. Polaris had reserves related to potential interest of $359,000 and $496,000 recorded as a component of Long term income taxes payable at December 31, 2012 and 2011, respectively. The entire balance of unrecognized tax benefits at December 31, 2012, if recognized, would affect the Company’s effective tax rate. The Company does not anticipate that total unrecognized tax benefits will materially change in the next twelve months. Tax years 2009 through 2012 remain open to examination by certain tax jurisdictions to which the Company is subject. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
|  | For the Years Ended December 31, |
|  | 2012 |  |  | 2011 |
Balance at January 1, |  | $ | 7,837 |  |  | $ | 5,509 |
Gross increases for tax positions of prior years |  |  | 83 |  |  |  | 483 |
Gross decreases for tax positions of prior years |  |  | — |  |  |  | — |
Gross increases for tax positions of current year |  |  | 1,137 |  |  |  | 1,956 |
Decreases due to settlements |  |  | (1,994 | ) |  |  | — |
Decreases for lapse of statute of limitations |  |  | — |  |  |  | (111 | )
Balance at December 31, |  | $ | 7,063 |  |  | $ | 7,837 |

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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 Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: 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=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: 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=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: 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=6907707&loc=d3e32537-109319 Reference 7: 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=6907707&loc=d3e32639-109319 Reference 8: 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=6907707&loc=d3e32559-109319 + Details
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