Tecumseh Products 2012 Annual Report Download - page 30

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Income Taxes
We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized for
the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities are recognized for
the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and
liabilities, and for operating loss and tax credit carry forwards. Management must make assumptions, judgments and estimates
to determine our current provision for income taxes, our deferred tax assets and liabilities and any valuation allowance to be
recorded against a deferred tax asset.
Our assumptions, judgments and estimates relative to the current provision for income taxes take into account current tax laws,
our interpretation of current tax laws and possible outcomes of current and future audits conducted by foreign and domestic tax
authorities. We establish reserves for income taxes to address potential exposures involving tax positions that could be
challenged by tax authorities. Although we believe our assumptions, judgments and estimates are reasonable, changes in tax
laws or our interpretation of tax laws or the resolution of current or any future tax audits could significantly impact the amounts
provided for income taxes in our consolidated financial statements.
Our assumptions, judgments and estimates relative to the value of a deferred tax asset take into account predictions of the
amount and category of future taxable income, such as income from operations or capital gains income. Actual operating
results and the underlying amount and category of income in future years could render our current assumptions, judgments and
estimates of recoverable net deferred taxes inaccurate. Any of the assumptions, judgments and estimates mentioned above
could cause our actual income tax obligations to differ from our estimates, thus materially impacting our financial position and
results of operations. Historically, our assumptions, judgments and estimates have not differed materially from actual results;
however, unanticipated events such as income from operations or capital gains income could result in material changes to our
tax accounts in future periods.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In August 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2012-03,
Technical Amendments and Corrections to SEC Sections. The update amends the FASB Accounting Standards Codification
(ASC) SEC Sections to ensure consistency with the other sections of the ASC. The principal changes involve revision or
removal of accounting guidance references and other conforming changes; they are not expected to change practice and will
have no material effect on our financial statements.
In October 2012, the Financial Accounting Standards Board (FASB) issued ASU No. 2012-04, Technical Corrections and
Improvements. The update amends the FASB ASC for technical corrections and clarifications. The majority of the amendments
are not expected to change practice, and therefore transition guidance is not provided. The amendments that are subject to
transition guidance will be effective for fiscal periods beginning after December 15, 2012. These amendments are related to the
following topics: contracts in an entity's own equity, defined contribution pension plans and health and welfare benefit plans.
Management believes ASU No. 2012-04 will have no material effect on our financial statements.
In February 2013, the Financial Accounting Standards Board (FASB) issued ASU No. 2013-02, Comprehensive Income:
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The update requires entities to present
the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income,
if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.
This information can be presented either on the face of the income statement or in the notes to the financial statements. The
amendments are effective for reporting periods beginning after December 15, 2012. ASU No. 2013-02 impacts presentation and
disclosure only and management believes it will have no material effect on our financial statements.