Tecumseh Products 2014 Annual Report Download - page 62

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previous experience with tax attributes expiring unused and tax planning alternatives. In making such judgments, significant
weight is given to evidence that can be objectively verified. A significant piece of objective negative evidence evaluated was
the cumulative loss incurred over the three-year period ended December 31, 2014. This objective negative evidence limits the
ability to consider other subjective evidence such as our projections for future growth.
Based on this assessment, full valuation allowances have been recorded against our net deferred tax assets for all tax
jurisdictions in which we believe it is more likely than not that the deferred taxes will not be realized. Full valuation
allowances were recorded for all of our tax jurisdictions except for Mexico and Malaysia. The amount of the deferred tax
assets considered realizable, however, could be adjusted if estimates of future taxable income during the carry forward period
are reduced or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may
be given to subjective evidence such as our projections for growth.
At December 31, 2014 and 2013 we did not have any unrecognized tax benefits.
We accrue interest and penalties related to unrecognized tax benefits in our provision for income taxes. At December 31, 2014
and 2013, we had no accrued interest and penalties.
We file U.S., state and foreign income tax returns in jurisdictions with varying statues of limitations. We have open tax years
from 2007 to 2013 with various significant taxing jurisdictions including Canada, France and Brazil. In the U.S., our federal
income tax returns through 2005 have been examined by the Internal Revenue Service and we have open tax years from 2010
to 2013.
Management is not aware of any uncertain tax positions taken or expected to be taken that would require recognition of a
liability or asset for disclosure in the financial statements.
NOTE 13. Fair Value Measurements
We use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value
disclosure. We categorize assets and liabilities at fair value in three levels, based on the markets in which the assets and
liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are as follows:
Level 1 Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2 Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for
identical or similar instruments in markets that are not active, and model-based valuation techniques
for which all significant assumptions are observable in the market.
Level 3 Valuation is generated from model-based techniques that use at least one significant assumption not
observable in the market. These unobservable assumptions reflect estimates of assumptions that
market participants would use in pricing the asset or liability.
Except for derivative instruments, pension liabilities and pension plan assets, the Company has no financial assets and
liabilities that are carried at fair value at December 31, 2014 and 2013. The carrying amounts of financial instruments
comprising cash and cash equivalents, and accounts receivable approximate their fair values due to their short-term nature. The
carrying value of the Company’s long-term debt approximates its fair value because interest charged on the loan balance is
variable. See Note 8, “Debt”, for a description of Company’s debt and corresponding rates of interest. See Note 5, “Pension
and Other Postretirement Benefit Plans”, regarding the fair value of pension liabilities and pension plan assets. See Note 14,
“Derivative Instruments and Hedging Activities”, regarding the fair value of derivative instruments and hedging activities.
Certain Company assets are required to be recorded at fair value on a non-recurring basis when events and circumstances
indicate that the carrying value may not be recoverable. As of December 31, 2014 and 2013, the Company did not have any
assets at fair value on a non-recurring basis.
The following is a description of valuation methodologies used for our assets and liabilities recorded at fair value.
Foreign currency and commodity derivative contracts
Derivative instruments recognized on our Consolidated Balance Sheets consist of foreign currency forward exchange contracts,
commodity futures contracts and interest rate swaps. These contracts are recognized at the estimated amount at which they
could be settled based on market observable inputs, such as forward market exchange rates and are recorded on our