MoneyGram 2009 Annual Report Download - page 123

Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Unrecognized tax benefits are recorded in "Accounts payable and other liabilities" in the Consolidated Balance Sheets. A reconciliation
of unrecognized tax benefits for 2009 is as follows:
(Amounts in thousands) 2009 2008 2007
Beginning balance $ 13,089 $ 33,669 $ 33,351
Additions based on tax positions related to the current year 832 5,711 4,527
Settlements (1,029) — (1,965)
Lapse in statute of limitations (2,181) (479) (3,399)
Reductions for tax positions of prior years — (19,204) (748)
Foreign currency translation — (6,608) 1,903
Ending balance $ 10,711 $ 13,089 $ 33,669
As of December 31, 2009, the liability for unrecognized tax benefits was $10.7 million, of which $4.2 million could impact the effective
tax rate if recognized. The Company accrues interest and penalties for unrecognized tax benefits through "Income tax (benefit) expense"
in the Consolidated Statements of Loss. For the years ended December 31, 2009, 2008 and 2007, the Company accrued approximately
$0.6 million, $2.8 million and $3.5 million in interest and penalties in its Consolidated Statements of Loss, respectively. As of
December 31, 2009 and 2008, the Company had a liability of $1.7 million and $3.6 million for interest and penalties related to its
unrecognized tax benefits, respectively. As of December 31, 2009, it is not possible to reasonably estimate the expected change to the
total amount of unrecognized tax positions over the next 12 months.
The Company does not consider its earnings in its foreign entities to be permanently reinvested. As of December 31, 2009 and 2008, a
deferred tax liability of $6.2 million and $4.4 million, respectively, was recognized for the unremitted earnings of its foreign entities.
Prior to the Company's spin-off from Viad, income taxes were determined on a separate return basis as if MoneyGram had not been
eligible to be included in the consolidated income tax return of Viad and its affiliates. Subsequent to the spin-off, MoneyGram is
considered the divesting entity and treated as the "accounting successor" to Viad and the continuing business of Viad is referred to as
"New Viad." As part of the Distribution, the Company entered into a Tax Sharing Agreement with Viad which provides for, among other
things, the allocation between MoneyGram and New Viad of federal, state, local and foreign tax liabilities and tax liabilities resulting
from the audit or other adjustment to previously filed tax returns. The Tax Sharing Agreement provides that through the Distribution
Date, the results of MoneyGram and its subsidiaries' operations are included in Viad's consolidated United States federal income tax
returns. In general, the Tax Sharing Agreement provides that MoneyGram will be liable for all federal, state, local, and foreign tax
liabilities, including such liabilities resulting from the audit of or other adjustment to previously filed tax returns, that are attributable to
the business of MoneyGram for periods through the Distribution Date, and that Viad will be responsible for all other of these taxes.
Note 16 — Commitments and Contingencies
Operating Leases — The Company has various non-cancelable operating leases for buildings and equipment that terminate through 2017.
Certain of these leases contain rent holidays and rent escalation clauses based on pre-determined annual rate increases. The Company
recognizes rent expense under the straight-line method over the term of the lease. Any difference between the straight-line rent amounts
and amounts payable under the leases are recorded as deferred rent in "Accounts payable and other liabilities" in the Consolidated
Balance Sheets. Cash or lease incentives received under certain leases are recorded as deferred rent when the incentive is received and
amortized as a reduction to rent over the term of the lease using the straight-line method. Incentives received relating to tenant
improvements are capitalized as leasehold improvements and depreciated over the shorter of the remaining term of the lease or 10 years.
At December 31, 2009, the deferred rent liability relating to these incentives was $2.1 million.
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