Time Magazine 2010 Annual Report Download - page 99

Accounting for Uncertainty in Income Taxes
The Company recognizes income tax benefits for tax positions determined more likely than not to be sustained
upon examination, based on the technical merits of the positions. The reserve for uncertain income tax positions is
included in other liabilities in the consolidated balance sheet.
The Company does not currently anticipate that its existing reserves related to uncertain tax positions as of
December 31, 2010 will significantly increase or decrease during the twelve-month period ending December 31,
2011; however, various events could cause the Company’s current expectations to change in the future. Should the
Company’s position with respect to the majority of these uncertain tax positions be upheld, the effect would be
recorded in the consolidated statement of operations as part of the income tax provision.
Changes in the Company’s uncertain income tax positions, excluding the related accrual for interest and
penalties, from January 1 through December 31 are set forth below (millions):
2010 2009
Beginning balance ............................................ $ 1,953 $ 1,954
Additions for prior year tax positions . . . ........................... 134 130
Additions for current year tax positions . ........................... 80 227
Reductions for prior year tax positions . . ........................... (52) (273)
Settlements ................................................. (8) (66)
Lapses in statute of limitations .................................. (7) (19)
Ending balance .............................................. $ 2,100 $ 1,953
During the year ended December 31, 2010, the Company recorded interest reserves through the consolidated
statement of operations of approximately $84 million and made interest payments in connection with settlements
reached during 2010 of approximately $8 million. During the year ended December 31, 2009, the Company
recorded interest reserves through the consolidated statement of operations of approximately $88 million and made
interest payments in connection with settlements reached during 2009 of approximately $11 million. The amount
accrued for interest and penalties as of December 31, 2010 and 2009 was $349 million and $273 million,
respectively. The Company’s policy is to recognize interest and penalties accrued on uncertain tax positions as part
of income tax expense.
During 2009, the Internal Revenue Service (“IRS”) substantially concluded its examination of the Company’s
federal income tax returns for the 2002 — 2004 tax years, which did not result in the Company being required to
make any material payments to the IRS. One matter relating to the character of certain warrants received from a
third party has been referred to the IRS Appeals Division. The Company believes its position with regard to this
matter is more likely than not to be sustained. However, should the IRS prevail, the additional tax payable by the
Company would be approximately $70 million.
The Company and its subsidiaries file income tax returns in the U.S. and various state and local and foreign
jurisdictions. The IRS is currently conducting an examination of the Company’s U.S. income tax returns for the
2005 through 2007 period. The tax years that remain subject to examination by significant jurisdiction are as
follows:
U.S. federal ......................................... 2002 through the current period
California ........................................... 2006 through the current period
New York State ...................................... 2000 through the current period
New York City ....................................... 2000 through the current period
87
TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)