Express 2014 Annual Report Download - page 43

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Description of Policy Judgments and Uncertainties
Effect if Actual Results Differ
from Assumptions
Income Taxes
We account for income taxes using
the asset and liability method. Under
this method, the amount of taxes
currently payable or refundable is
accrued and deferred tax assets and
liabilities are recognized for the
estimated future tax consequences of
temporary differences that currently
exist between the tax basis and the
financial reporting basis of our assets
and liabilities.
Our accounting methodology for
calculating our tax liabilities
contains uncertainties because
our judgments may change as a
result of evaluation of new
information not previously
available.
We have no reason to believe that
there will be a material change in
our tax related balances.
However, due to the complexity
of some of these uncertainties, the
ultimate resolution may result in a
payment that is materially
different from the current estimate
of our tax liabilities.
Deferred tax assets and liabilities are
measured using the enacted tax rates
in effect in the years when those
temporary differences are expected to
reverse. The effect on deferred taxes
from a change in tax rate is
recognized in earnings in the period
that includes the enactment date of
the change.
Our deferred tax asset and
liability balances contain
uncertainty because changes in
tax laws and rates may differ
from estimates and judgments
made by management.
We may be subject to periodic
audits by the Internal Revenue
Service and other taxing
authorities. These audits may
challenge certain of our tax
positions, such as the timing and
amount of deductions and
allocation of taxable income to
various jurisdictions.
We have no reason to believe that
our results of operations will
differ materially from our current
expectations. However, if actual
results are not consistent with our
estimates, we may need to adjust
the valuation allowance in the
future. An increase or decrease in
the valuation allowance would
result in a respective increase or
decrease in our effective tax rate
in the period the increase occurs.
To the extent that we prevail in
matters for which unrecognized
tax benefit liabilities have been
established or are required to pay
amounts in excess of recorded
unrecognized tax benefit
liabilities, our effective tax rate in
a given financial statement period
could be materially affected. An
unfavorable tax settlement would
require use of our cash and result
in an increase in our effective tax
rate in the period of resolution. A
favorable tax settlement would be
recognized as a reduction in our
effective tax rate in the period of
resolution.
39