MasterCard 2008 Annual Report Download - page 80

Financial Statement Caption/
Critical Accounting Estimate Assumptions/Approach Used
Effect if Actual Results Differ
from Assumptions
The American Express Settlement
was discounted at 5.75% over the
three-year payment term.
For the American Express
Settlement, a one percent increase in
the discount rate would have
decreased the litigation settlement
expense for 2008 by approximately
$24 million. A one percent decrease
in the discount rate would produce
the opposite impact.
For the American Express
Settlement, a one percent increase in
the discount rate would have
increased interest expense for 2008
by approximately $7 million. A one
percent decrease in the discount rate
would produce the opposite impact.
Income Taxes
In calculating our effective tax rate,
we need to make decisions
regarding certain tax positions,
including the timing and amount of
deductions and allocation of income
among various tax jurisdictions.
We have various tax filing
positions, including the timing and
amount of deductions,
establishment of reserves for
credits and audit matters and the
allocation of income among
various tax jurisdictions.
Although we believe that our
estimates and judgments discussed
herein are reasonable, actual results
may differ by a material amount.
We record a valuation allowance to
reduce our deferred tax assets to the
amount that is more likely than not
to be realized.
We considered projected future
taxable income and ongoing tax
planning strategies in assessing the
need for the valuation allowance.
If we realize a deferred tax asset
subject to a valuation allowance in
excess of the deferred tax asset net
of that valuation allowance or if we
were unable to realize such a net
deferred tax asset; an adjustment to
the deferred tax asset would
increase or decrease earnings,
respectively, in the period.
We record tax liabilities for
uncertain tax positions taken or to
be taken on tax returns that may not
be sustained or would only partially
be sustained, upon examination by
the relevant taxing authorities.
We considered all relevant facts
and current authorities in the tax
law in assessing whether an
uncertain tax position was more
likely than not to be sustained.
If upon examination, we realize a
tax benefit which is not fully
sustained or is more favorably
sustained this would decrease or
increase earnings, in the period. In
certain situations, the Company will
have offsetting tax deductions or tax
credits.
We do not record U.S. income tax
expense for foreign earnings which
we plan to reinvest to expand our
international operations.
We considered business plans,
planning opportunities, and
expected future outcomes in
assessing the needs for future
expansion and support of our
international operations.
If our business plans change or our
future outcomes differ from our
expectations, additional U.S.
income tax expense would have to
be recorded which would increase
our effective tax rate in that period.
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