Time Magazine 2013 Annual Report Download - page 109

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TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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.
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):
Year Ended December 31,
2013 2012 2011
Beginning balance ........................................ $ 2,222 $ 2,122 $ 2,100
Additions for prior year tax positions .......................... 124 102 88
Additions for current year tax positions ........................ 79 97 120
Reductions for prior year tax positions ......................... (144) (61) (153)
Settlements .............................................. (84) (26) (15)
Lapses in statute of limitations ............................... (11) (12) (18)
Ending balance ........................................... $ 2,186 $ 2,222 $ 2,122
Should the Company’s position with respect to these uncertain tax positions be upheld, the significant
majority of the effect would be recorded in the Consolidated Statement of Operations as part of the Income tax
provision.
During the year ended December 31, 2013, the Company recorded interest reserves in the Consolidated
Statement of Operations of approximately $34 million and made interest payments in connection with
settlements reached during 2013 of approximately $38 million. During the year ended December 31, 2012, the
Company recorded interest reserves in the Consolidated Statement of Operations of approximately $59 million
and made interest payments in connection with settlements reached during 2012 of approximately $21 million.
The amount accrued for interest and penalties as of December 31, 2013 and 2012 was $421 million and $425
million, respectively. The Company’s policy is to recognize interest and penalties accrued on uncertain tax
positions as part of income tax expense.
In the Company’s judgment, uncertainties related to certain tax matters are reasonably possible of being
resolved during the next twelve months. The effect of the resolutions of these matters, a portion of which could
vary based on the final terms and timing of actual settlements with taxing authorities, is estimated to be a
reduction of recorded unrecognized tax benefits ranging from $0 million to $650 million, most of which would
lower the Company’s effective tax rate. The Company does not otherwise currently anticipate that its reserves
related to uncertain income tax positions as of December 31, 2013 will significantly increase or decrease during
the twelve-month period ended December 31, 2014; however, various events could cause the Company’s current
expectations to change in the future.
The Company and its subsidiaries file income tax returns in the U.S. and various state and local and foreign
jurisdictions. The Internal Revenue Service (“IRS”) is currently conducting an examination of the Company’s
U.S. income tax returns for the 2005 through 2007 period.
The Company has filed a petition with the Tax Court on a matter relating to the appropriate tax
characterization of certain stock warrants received from a third party in 2002. Should the IRS prevail, the
additional tax payable by the Company would be approximately $70 million.
93