Discontinued Operations
In 2009, the Company unveiled a new business strategy to drive growth through a focus of efforts and resources on the unique strengths of the Harley-Davidson brand and to enhance productivity and profitability through continuous improvement. The Company’s Board of Directors approved and the Company committed to the divestiture of MV as part of this strategy.
At each subsequent reporting date through the date of sale of MV in August 2010, the Company estimated the fair value of MV, less selling costs, and recognized the resulting impairment charges and tax benefits.
As of December 31, 2010, the Company’s estimated tax benefit associated with the loss on the sale of MV was $101.0 million of which $43.5 million was deemed uncertain and appropriately reserved against. As a result, the total net tax benefit recognized as of December 31, 2010 was $57.5 million.
In determining the tax benefit recognized as of December 2010, the Company engaged appropriate technical expertise and considered all relevant available information. In accordance with ASC 740, “Income Taxes,” at each balance sheet date during this period, the Company re-evaluated the overall tax benefit, determined that it was at least more likely than not that it would be sustained upon review and calculated the amount of recognized tax benefit based on a cumulative probability basis.
During 2010, the Company voluntarily elected to participate in a pre-filing agreement process with the Internal Revenue Service (IRS) in order to accelerate the IRS' review of the Company’s tax position related to MV. The IRS effectively completed its review in late 2011 and executed a Closing Agreement on Final Determination Covering Specific Matters with the Company.
In the fourth quarter of 2011, given the outcome of the closing agreement, the Company recognized a $43.5 million tax benefit by reversing the reserve it has previously recorded and recognized an incremental $7.5 million tax benefit related to the final calculation of the tax basis in the loan to and the stock of MV. As a result, the Company recorded income from discontinued operations of $51.0 million or $0.22 per share for the year ended December 31, 2011.
