FORM 20-F - Check Point

CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share amounts)
NOTE 9:- ACCRUED EXPENSES AND OTHER LIABILITIES
F-35
December 31,
2008 2009
Income taxes payable $ 18,456 $ 24,851
Accrued products and licenses costs 11,118 22,276
Current deferred tax liability, net 7,238 7,420
Marketing expenses payable 4,506 5,176
Legal accrual 3,383 11,025
Purchase commitment to subcontractors - 4,486
Accrued expenses 13,764 17,750
NOTE 10:- COMMITMENTS AND CONTINGENT LIABILITIES
a. Lease commitments
$ 58,465 $ 92,984
Certain facilities of the Company are rented under operating lease agreements that expire
between 2010 and 2014. Certain of these agreements have immaterial free rent payment
provisions. The Company recognizes rent expense under such arrangements on a straightline
basis. The Company leases vehicles under standard commercial operating leases.
Aggregate minimum lease commitments under non-cancelable operating leases as of
December 31, 2009, were as follows:
2010 $ 6,576
2011 3,427
2012 1,705
2013 391
2014 87
$ 12,186
Rent expenses for the years ended December 31, 2007, 2008 and 2009, were $ 8,295, $
7,307 and $ 7,068, respectively.
b. Litigation:
Following audits of the Company’s 2002 and 2003 corporate tax returns, the Israeli Tax
Authority (the “ITA”) issued orders challenging the Company’s positions on several issues
including matters, such as the usage of funds earned by its approved enterprise for
investments outside of Israel, deductibility of employee’s stock options expenses, percentage
of foreign ownership of its shares, taxation of interest earned outside of Israel and
deductibility of research and development expenses. The largest amount in dispute relates to
the treatment of financial income on cash that is held and managed by the Company’s
wholly-owned Singapore subsidiary, which the ITA is seeking to tax in Israel. In an
additional challenge to this amount, the ITA reclassified the transfer of funds from the
Company to its subsidiary in Singapore as a dividend for purposes of the Law for the
Encouragement of Capital Investments, which would result in tax on the funds transferred.
The ITA orders also contest the Company’s positions on various other issues. The ITA
therefore demanded the payment of additional taxes in the aggregate amount of NIS 963