Tech Data 2014 Annual Report Download - page 23

Table of Contents
European goodwill asset as of January 31, 2014 was $225.6 million. The estimated fair value of our European reporting unit exceeded the
carrying value by less than 5% in the most recent impairment test. Key assumptions used in determining fair value include projected growth and
operating margin, working capital requirements and discount rates. While we do not believe that our European goodwill is impaired at this time,
if actual results are substantially lower than the projections used in our valuation methodology, or if market discount rates or our market
capitalization substantially increase or decrease, respectively, our future valuations could be adversely affected and a future impairment of
goodwill is reasonably possible.
Income Taxes
We record valuation allowances to reduce our deferred tax assets to the amount expected to be realized. We consider all positive and negative
evidence available in determining the potential of realizing deferred tax assets, including the scheduled reversal of temporary differences, recent
cumulative losses, recent and projected future taxable income, and prudent and feasible tax planning strategies. In making this determination, we
place greater emphasis on recent cumulative losses and recent taxable income due to the inherent lack of subjectivity associated with these
factors. If we determine it is more likely than not that we will be able to use a deferred tax asset in the future in excess of its net carrying value,
an adjustment to the deferred tax asset valuation allowance would be made to reduce income tax expense, thereby increasing net income in the
period such determination was made. Should we determine that we are not likely to realize all or part of our net deferred tax assets in the future,
an adjustment to the deferred tax asset valuation allowance would be made to income tax expense, thereby reducing net income in the period
such determination was made.
Contingencies
We accrue for contingent obligations, including estimated legal costs, when the obligation is probable and the amount is reasonably estimable.
As facts concerning contingencies become known, we reassess our position and make appropriate adjustments to the financial statements.
Estimates that are particularly sensitive to future changes include those related to tax, legal, and other regulatory matters such as imports and
exports, the imposition of international governmental controls, changes in the interpretation and enforcement of international laws (in particular
related to items such as duty and taxation), and the impact of local economic conditions and practices, which are all subject to change as events
evolve and as additional information becomes available during the administrative and litigation process.
Recent Accounting Pronouncements and Legislation
See Note 1 of Notes to Consolidated Financial Statements for the discussion on recent accounting pronouncements.
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