Western Union 2012 Annual Report Download - page 77

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72
Other Commercial Commitments
We had approximately $100 million in outstanding letters of credit and bank guarantees as of December 31, 2012 with
expiration dates through 2016, the majority of which contain a one-year renewal option. The letters of credit and bank guarantees
are primarily held in connection with lease arrangements and certain agent agreements. We expect to renew the letters of credit
and bank guarantees prior to expiration in most circumstances.
Critical Accounting Policies and Estimates
Management's discussion and analysis of results of operations and financial condition is based on our consolidated financial
statements that have been prepared in accordance with accounting principles generally accepted in the United States of America.
The preparation of these consolidated financial statements requires that management make estimates and assumptions that affect
the amounts reported for revenues, expenses, assets, liabilities and other related disclosures. Actual results may or may not differ
from these estimates. Our significant accounting policies are discussed in Part II, Item 8, Financial Statements and Supplementary
Data, Note 2, “Summary of Significant Accounting Policies.”
Our critical accounting policies and estimates, described below, are very important to the portrayal of our financial condition
and our results of operations and applying them requires our management to make difficult, subjective and complex judgments.
We believe that the understanding of these key accounting policies and estimates is essential in achieving more insight into our
operating results and financial condition.
Description Judgments and Uncertainties Effect if Actual Results Differ from Assumptions
Income Taxes
Reinvestment of foreign earnings
Income taxes, as reported in our
consolidated financial statements,
represent the net amount of income taxes
we expect to pay to various taxing
jurisdictions in connection with our
operations. We provide for income taxes
based on amounts that we believe we will
ultimately owe after applying the required
analyses and judgments.
With respect to earnings in certain foreign
jurisdictions, we have provided for
income taxes on such earnings at a more
favorable income tax rate than the
combined United States federal and state
income tax rates because we expect to
reinvest these earnings outside of the
United States indefinitely.
No provision has been made for United
States federal and state income taxes on
certain of our outside tax basis differences,
which primarily relate to accumulated
foreign earnings of approximately $4.4
billion as of December 31, 2012, which we
expect to reinvest outside the United States
indefinitely.
Upon distribution of these earnings to the
United States in the form of actual or
constructive dividends, we would be
subject to United States income taxes
(subject to an adjustment for foreign tax
credits), state income taxes and possible
withholding taxes payable to various
foreign countries which could result in a
material impact to our financial condition,
results of operations and cash flows in the
period such distribution occurred.
Determination of the amount of
unrecognized deferred United States tax
liability is not practicable because of the
complexities associated with its
hypothetical calculation.