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Income Taxes
 3 Months Ended
Apr. 28, 2012
Income Taxes  
Income Taxes

 

7.  Income Taxes

 

Income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.  In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of its deferred tax assets will not be realized.

 

The Company’s effective income tax rate of 36.3% for the thirteen weeks ended April 28, 2012 was higher than the 34.5% rate for the thirteen weeks ended April 30, 2011, because of the expiration of the Work Opportunity Tax Credit (WOTC).  It is possible that Congress will retroactively reinstate the WOTC back to the beginning of 2012; however, due to the uncertainty involved, no WOTC benefits were recorded in the thirteen weeks ended April 28, 2012.  Such benefits would be recorded if and when the legislation is enacted.  If the WOTC had been extended as of the beginning of 2012, the Company’s effective income tax rate would have been 25.6% in the thirteen weeks ended April 28, 2012, with the decrease in such rate from last year resulting from tax credits being higher as a percentage of pretax income in fiscal 2012.