MasterCard 2009 Annual Report Download - page 77

Financial Statement Caption/
Critical Accounting Estimate Assumptions/Approach Used
Effect if Actual Results Differ
from Assumptions
Legal and Regulatory Matters
We are party to legal and regulatory
proceedings with respect to a
variety of matters. Except as
described in Note 19 (Obligations
Under Litigation Settlements) and
Note 21 (Legal and Regulatory
Proceedings) to the consolidated
financial statements in Part II,
Item 8 of this Report, MasterCard
does not believe that any legal or
regulatory proceedings to which it is
a party would have a material
adverse impact on its business or
prospects.
We evaluate the likelihood of an
unfavorable outcome of the legal
or regulatory proceedings to which
we are party. Our judgments are
subjective based on the status of
the legal or regulatory
proceedings, the merits of our
defenses and consultation with in-
house and outside legal counsel.
Due to the inherent uncertainties of
the legal and regulatory process in
the multiple jurisdictions in which
we operate, our judgments may be
materially different than the actual
outcomes.
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, U.S. income tax
expense and our effective tax rate
could increase or decrease in that
period.
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