Morgan Stanley 2015 Annual Report Download - page 80

interpretations by the taxpayer and the relevant governmental taxing authorities. The Company must make judgments and
interpretations about the application of these inherently complex tax laws when determining the provision for income taxes
and the expense for indirect taxes and must also make estimates about when certain items affect taxable income in the
various tax jurisdictions. Disputes over interpretations of the tax laws may be settled with the taxing authority upon
examination or audit. The Company periodically evaluates the likelihood of assessments in each taxing jurisdiction resulting
from current and subsequent years’ examinations, and unrecognized tax benefits related to potential losses that may arise
from tax audits are established in accordance with the guidance on accounting for unrecognized tax benefits. Once
established, unrecognized tax benefits are adjusted when there is more information available or when an event occurs
requiring a change.
The Company’s provision for income taxes is composed of current and deferred taxes. Current income taxes approximate
taxes to be paid or refunded for the current period. The Company’s deferred income taxes reflect the net tax effects of
temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the
applicable enacted tax rates and laws that will be in effect when such differences are expected to reverse. The Company’s
deferred tax balances also include deferred assets related to tax attribute carryforwards, such as net operating losses and tax
credits that will be realized through reduction of future tax liabilities and, in some cases, are subject to expiration if not
utilized within certain periods. The Company performs regular reviews to ascertain whether deferred tax assets are realizable.
These reviews include management’s estimates and assumptions regarding future taxable income and incorporate various tax
planning strategies, including strategies that may be available to tax attribute carryforwards before they expire. Once the
deferred tax asset balances have been determined, the Company may record a valuation allowance against the deferred tax
asset balances to reflect the amount of these balances (net of valuation allowance) that the Company estimates it is more
likely than not to realize at a future date. Both current and deferred income taxes could reflect adjustments related to the
Company’s unrecognized tax benefits.
Significant judgment is required in estimating the consolidated provision for (benefit from) income taxes, current and
deferred tax balances (including valuation allowance, if any), accrued interest or penalties and uncertain tax positions.
Revisions in estimates and/or the actual costs of a tax assessment may ultimately be materially different from the recorded
accruals and unrecognized tax benefits, if any.
See Note 2 to the consolidated financial statements in Item 8 for additional information on the Company’s significant
assumptions, judgments and interpretations associated with the accounting for income taxes and Note 20 to the consolidated
financial statements in Item 8 for additional information on the Company’s tax examinations.
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