Cincinnati Bell 2013 Annual Report Download - page 238

Form 10-K/A Part IV Cincinnati Bell Inc.
CyrusOne Inc. and CyrusOne LP
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(continued)
Restructuring Charges—Restructuring charges are a result of programs planned and controlled by
management that materially changes either the scope of business undertaken or the manner in which that business
is conducted. The 2013 restructuring charges were incurred as a result of moving certain administrative functions
to the Company’s corporate office. There were no such charges in 2012 or 2011.
Transaction-Related Compensation—During the period ended January 23, 2013, the Company received
an allocated compensation charge from CBI of $20.0 million for the settlement of its long-term incentive plan
associated with the completion of the IPO. The amount was determined by CBI and allocated to CyrusOne Inc.
on January 23, 2013, and reflected as expense and contributed capital in the respective period.
Operating and Transactional Taxes—Certain operating taxes, such as property, sales, use and value
added taxes, are reported as expenses in operating income. These taxes are not included in income tax expense
because the amounts to be paid are not dependent on the level of income generated. We also record operating
expenses for the establishment of liabilities related to certain operating tax audit exposures. These liabilities are
established based on our assessment of the probability of payment. Upon resolution of an audit, any remaining
liability not paid is released and increases operating income.
Income Taxes—The Company was included in CBI’s consolidated Texas tax return for all Predecessor
periods. In the accompanying financial statements, the Predecessor periods reflect income taxes as if the
Company was a separate stand-alone company. The income tax provision consists of an amount for taxes
currently payable and an amount for tax consequences deferred to future periods. CyrusOne Inc. will elect to be
taxed as a REIT under the Code, as amended, by making our REIT election upon the filing of our 2013 REIT
federal income tax return. Provided we qualify for taxation as a REIT and continue to meet the various
qualification tests mandated under the Code, we are generally not subject to corporate level federal income tax on
the earnings distributed currently to our shareholders. If we fail to qualify as a REIT in any taxable year, our
taxable income will be subject to federal income tax at regular corporate rates and any applicable alternative
minimum tax.
While CyrusOne Inc. and the Operating Partnership do not pay federal income taxes, we are still subject to
foreign, state and local income taxes in the locations in which we conduct business. Our taxable REIT
subsidiaries (each a “TRS”) are also subject to federal and state income taxes to the extent there is taxable
income.
Deferred income taxes are recognized in certain entities. Deferred income taxes are provided for temporary
differences in the bases between financial statement and income tax assets and liabilities. Deferred income taxes
are recalculated annually at rates then in effect. Valuation allowances are recorded to reduce deferred tax assets
to amounts that are more likely than not to be realized. The ultimate realization of the deferred tax assets depends
upon our ability to generate future taxable income during the periods in which basis differences and other
deductions become deductible and prior to the expiration of the net operating loss carryforwards.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction as well as various
foreign, state and local jurisdictions. The Company’s previous tax filings are subject to normal reviews by
regulatory agencies until the related statute of limitations expires. With a few exceptions, the Company is no
longer subject to U. S. federal, state or local examinations for years prior to 2010 and we have no liabilities for
uncertain tax positions as of December 31, 2013.
Foreign Currency Translation and Transactions—The financial position of foreign subsidiaries is
translated at the exchange rates in effect at the end of the period, while revenues and expenses are translated at
average rates of exchange during the period. Gains or losses from translation of foreign operations where the
local currency is the functional currency are included as components of other comprehensive (loss) income.
Gains or losses from foreign currency transactions are included in determining net income.
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