Time Magazine 2014 Annual Report Download - page 102

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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,
2014 2013 2012
(recast) (recast)
Beginning balance ........................................ $ 2,169 $ 2,203 $ 2,106
Additions for prior year tax positions .......................... 87 124 97
Additions for current year tax positions ........................ 69 76 94
Reductions for prior year tax positions ......................... (968) (140) (60)
Settlements .............................................. (8) (84) (26)
Lapses in statute of limitations ............................... (22) (10) (8)
Ending balance ........................................... $ 1,327 $ 2,169 $ 2,203
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, 2014, the Company recorded a decrease to interest reserves in the Consolidated
Statement of Operations of approximately $62 million and made interest payments in connection with settlements reached
during 2014 of approximately $12 million. During the year ended December 31, 2013, the Company recorded interest
reserves in the Consolidated Statement of Operations of approximately $35 million and made interest payments in
connection with settlements reached during 2013 of approximately $38 million. The amount accrued for interest and
penalties as of December 31, 2014 and 2013 was $346 million and $418 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 to $80 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, 2014 will
significantly increase or decrease during the twelve-month period ended December 31, 2015; however, various events could
cause the Company’s current expectations to change in the future.
During the year ended December 31, 2014, the Company recognized a tax benefit of $687 million primarily related to the
reversal of certain tax reserves, including related interest accruals, in connection with a Federal tax settlement on the
examination of the Company’s 2005 – 2007 tax returns. Certain matters involving the Company’s capital loss carryforward
and research and development tax credits were not resolved as part of the settlement and, accordingly, the Company is
pursuing resolution of such matters through the Internal Revenue Service’s (“IRS”) administrative appeals process.
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 2008 through 2010 period.
The Company has filed a petition with the United States Tax Court on a matter relating to the appropriate tax
characterization of stock warrants received from Google Inc. in 2002. In December 2014, the Company reached a
preliminary agreement with the IRS to resolve this matter. Final resolution of this matter is subject to agreement regarding
certain necessary computations and the preparation and execution of definitive documentation.
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