Western Union 2009 Annual Report Download - page 115

financial cost that does not exceed its related reserve. With respect to these reserves, the Company’s income
tax expense would include (i) any changes in tax reserves arising from material changes during the period in
the facts and circumstances (i.e., new information) surrounding a tax issue and (ii) any difference from the
Company’s tax position as recorded in the financial statements and the final resolution of a tax issue during
the period.
The Company adopted an accounting standard relating to the accounting for and disclosure of uncertain
tax positions on January 1, 2007. The cumulative effect of applying this standard resulted in a reduction of
$0.6 million to the January 1, 2007 balance of retained earnings.
Unrecognized tax benefits represent the aggregate tax effect of differences between tax return positions
and the amounts otherwise recognized in the Company’s financial statements, and are reflected in “Income
taxes payable” in the Consolidated Balance Sheets. A reconciliation of the beginning and ending amount of
unrecognized tax benefits, excluding interest and penalties, is as follows (in millions):
2009 2008
Balance at January 1, ...................................... $361.2 $251.4
Increases—positions taken in current period (a) .................. 124.3 93.8
Increases—positions taken in prior periods (b) ................... 0.4 28.4
Decreases—positions taken in prior periods ..................... — (7.9)
Decreases—settlements with taxing authorities ................... (4.4) (0.2)
Decreases—lapse of applicable statute of limitations ............... (4.3) (4.3)
Balance at December 31, ................................... $477.2 $361.2
(a) Includes recurring accruals for issues which initially arose in previous periods.
(b) Changes to positions taken in prior periods relate to changes in estimates used to calculate prior period
unrecognized tax benefits.
A substantial portion of the Company’s unrecognized tax benefits relate to the 2003 restructuring of the
Company’s international operations whereby the Company’s income from certain foreign-to-foreign money
transfer transactions has been taxed at relatively low foreign tax rates compared to the Company’s combined
federal and state tax rates in the United States. The total amount of unrecognized tax benefits that, if
recognized, would affect the effective tax rate was $468.6 million and $352.4 million as of December 31, 2009
and 2008, respectively, excluding interest and penalties.
The Company recognizes interest and penalties with respect to unrecognized tax benefits in “Provision for
income taxes” in its Consolidated Statements of Income, and records the associated liability in “Income taxes
payable” in its Consolidated Balance Sheets. The Company recognized $11.0 million, $11.6 million and
$13.5 million in interest and penalties during the years ended December 31, 2009, 2008 and 2007,
respectively. The Company has accrued $45.5 million and $35.8 million for the payment of interest and
penalties at December 31, 2009 and 2008, respectively.
Subject to the matter referenced in the paragraph below, the Company has identified no other uncertain
tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will
significantly increase or decrease within 12 months, except for recurring accruals on existing uncertain tax
positions. The change in unrecognized tax benefits during the years ended December 31, 2009 and 2008 is
substantially attributable to such recurring accruals.
The Company and its subsidiaries file tax returns for the United States, for multiple states and localities,
and for various non-United States jurisdictions, and the Company has identified the United States and Ireland
as its two major tax jurisdictions. The United States federal income tax returns of First Data, which include
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THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)