Allegheny Power 2010 Annual Report Download - page 70

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55
FirstEnergy accounts for uncertainty in income taxes recognized in its financial statements. We account for uncertain
income tax positions using a benefit recognition model with a two-step approach, a more-likely-than-not recognition
criterion and a measurement attribute that measures the position as the largest amount of tax benefit that is greater than
50% likely of being ultimately realized upon ultimate settlement. If it is not more likely than not that the benefit will be
sustained on its technical merits, no benefit will be recorded. Uncertain tax positions that relate only to timing of when an
item is included on a tax return are considered to have met the recognition threshold. The Company recognizes interest
expense or income related to uncertain tax positions. That amount is computed by applying the applicable statutory
interest rate to the difference between the tax position recognized and the amount previously taken or expected to be
taken on the tax return. FirstEnergy includes net interest and penalties in the provision for income taxes.
Goodwill
In a business combination, the excess of the purchase price over the estimated fair values of the assets acquired and
liabilities assumed is recognized as goodwill. Goodwill is evaluated for impairment at least annually and more frequently
if indicators of impairment arise. In accordance with accounting standards, if the fair value of a reporting unit is less than
its carrying value (including goodwill), the goodwill is tested for impairment. Impairment is indicated and a loss is
recognized if the implied fair value of a reporting unit's goodwill is less than the carrying value of its goodwill.
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
See Note 16 to the consolidated financial statements for discussion of new accounting pronouncements.