NetSpend 2010 Annual Report Download - page 62

Table of Contents
Establishing the reserve for transaction losses is an inherently uncertain process, and ultimate losses may vary from the current estimates.
We regularly update our reserve estimate as new facts become known and events occur that may impact the settlement or recovery of losses.
Income Taxes
We recognize tax benefits or expenses on the temporary difference between the financial reporting and tax bases of our assets and
liabilities. We measure deferred tax assets and liabilities using statutory based tax rates expected to apply to taxable income in the years in
which we expect those temporary differences to be recovered or settled. We are required to adjust our deferred tax assets and liabilities in the
period in which tax rates or the provisions of the income tax laws change. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount for which we believe recovery is more likely than not. We classify interest and penalties associated with
uncertain tax positions as a component of income tax expense.
Recent Accounting Pronouncements
New accounting pronouncements or changes in existing accounting pronouncements may have a significant effect on the results of
operations, the financial condition, or the net worth of the our business operations.
In January 2010, the FASB issued guidance on fair value measurements and disclosures to require new disclosures related to transfers into
and out of Levels 1 and 2 of the fair value hierarchy and additional disclosure requirements related to Level 3 measurements. The guidance also
clarifies existing fair value measurement disclosures about the level of disaggregation and about inputs and valuation techniques used to
measure fair value. The additional disclosure requirements are effective for the first reporting period beginning after December 15, 2009,
except for the additional disclosure requirements related to Level 3 measurements, which are effective for fiscal years beginning after
December 15, 2010. We adopted these provisions effective January 1, 2010, and they did not have a material impact on our disclosures.
In February 2010, the FASB issued an amendment to the guidelines on accounting for subsequent events. The amendment clarifies that an
SEC filer is required to evaluate subsequent events through the date that the financial statements are issued, but that SEC filers are not required
to disclose the date through which subsequent events have been evaluated. The amendment was effective upon issuance and did not have an
impact on our consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALIITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks as part of our ongoing business operations, primarily risks associated with fluctuating interest rates
for borrowings under our credit facility. Borrowings under our credit facility incur interest based on current market interest rates. We have not
historically used derivative financial instruments to manage these market risks. As of December 31, 2010, outstanding borrowings under our
credit facility were $58.5 million. A 1.0% increase or decrease in interest rates would have a $0.6 million impact on our operating results and
cash flows for fiscal 2010.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference to the consolidated financial statements set forth on pages 68 through
104 hereof.
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